Suzuki plans to set up a new diesel powerplant

Maruti Suzuki India is one car manufacturer with lot of things happening at the moment. While there is a new plant in Gujarat shaping up, the country’s largest car manufacturer also mulls to set up a new diesel powerplant. However, there are a lot of ifs and buts in this.  Suzuki Motors which is a 54% stake holder in MSI obviously will have to look at other perspectives before going ahead with the proposed plant.  The most important factor to influence their strategy is the government’s decision on the diesel cars.

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There is no point in setting up a new unit when there is absolutely no need for it. Obviously, if the demand for the Maruti diesel cars increase, thats when the auto major needs to think along those lines. If the government does increase the excise duty on the diesel cars as rumoured earlier, then there might be a possibility for the diesel car demand to go down.  However, not until the next budget session in March can the government pass any rule on this. Maruti India has four cars in their product line-up offered in both diesel and petrol engines. Maruti Ritz, Maruti Swift, Maruti SX4 sedan and Maruti Swift Dzire compact sedan.

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These cars offer the right comparison to show the kind of demand the diesel cars have over their petrol counterparts. Apparently MSI found that the diesel variants of these cars sold 80% more than their petrol siblings. There might be many reasons for the delay, but the Maruti Swift diesel today has a waiting period of 6-8 months, while the others also seem to bear more or less a similar waiting time. It is basically the Suzuki Powertrain India Limited (SPIL) that sources the diesel engines for Maruti India.

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On an overall, the SPIL produces 270,000 units per annum which is expected to reach 300,000 units soon. Now here, there is another twist . Maruti India is only 30% stake holder in the SPIL. So, Maruti India shares the total crop with its Japanese counterpart Suzuki Motors. A new deal with Fiat is a helping hand where around 100,000 units will be supplied to Maruti Suzuki India. Now, the whole hullabaloo is to shorten the wait period of the Maruti diesel cars. While this is one perspective at looking at the scenario, let us see why Maruti India needs a new diesel powerplant in the first place.

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There is a certain opinion here from market experts who believe that diesel car demand is going to be here for sometime. Whether the government goes along with the increased excise duty on the diesel cars or otherwise, the demand is not going to die soon. This is more because the gap between the diesel and petrol price is ever widening. Today, the difference between the two fuels stand over Rs 30. So, there is a substantial difference in the running costs of petrol and diesel cars. Therefore, Maruti India better wait until March to take a call on the proposed diesel engine plant.

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