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At full capacity, this facility is expected to churn out 1.5 million cars a year, taking Maruti’s total annual output to over 3.2 million units with the Gurgaon and Manesar facilities in Haryana combined.
Analysts said that the move makes sense but Maruti would have to ensure that labour relations are cordial. The company witnessed major labour trouble at its plant in Manesar this year, which crippled production of some its best-selling models.
VG Ramakrishnan, managing director, South Asia, at consultancy Frost & Sullivan, said that making India an export base will give Suzuki the flexibility to push more products at home, such as the 600cc small cars it sells in Japan. The move may also have something to do with the challenges Japanese companies are facing in China.
"It’s a fairly smart move for Suzuki and significant for profitability. They just have to make sure that local labour issues don’t disturb global operations later. Car companies have to make India a hub to make India work as a market – because to keep prices low at home, they have to have high volumes," Ramakrishnan said.
Suzuki also has a huge first-mover advantage in India in terms of suppliers who are dependent and loyal to Maruti and will invest more for the company, he said.
* Maruti investing R8,000 crore in Gujarat; proximity to ports for exports
* Total production capacity likely to cross 3 million units by 2018-19
* India good small-car export hub as huge supplier industry in place
* Hyundai, Nissan use India as small- car base; Honda, Toyota coming