Maruti Suzuki will spend a whopping Rs 15,000 crore towards expanding its sales-and-service infrastructure over the next five years, as India's biggest carmaker aims to grow its annual sales to nearly 2 million units by 2020 from 1.1 million vehicles in last fiscal year.
The earmarked investment will be used to procure land for dealers to double the number of dealership outlets, expanding warehousing capabilities and transportation facilities.
The growth in the company's annual sales will be mainly led by production at its third plant in Gujarat, which is expected to start operations by early 2017.
"We have to double our network as the Gujarat plant output will lead to a gradual doubling of sales. The bulk of the investment required for additional sales will precede start of production at our Gujarat plant. The total money needed for creating additional sales-and-service infrastructure has been estimated to be Rs 30,000 crore. Of that, half the money will be invested by us, and the rest by dealers," Maruti Suzuki Chairman R C Bhargava told Business Standard.
Currently, the Delhi-headquartered automobile company has more than 1,700 dealership outlets in the country and it has recently set up a new dealership network, Nexa, to sell premium cars. The company is also planning to open a network for its light commercial vehicle launches.
The company had spent Rs 11,000 crore to build its current sales-and- service infrastructure , Bhargava said adding that the setting up of the same infrastructure would now cost Rs 30,000 crore due to an exponential rise in land prices.
As land prices are expensive for dealers, the company plans to procure the land and lease it for the dealers. It has already formed a team of executives from real estate firms to manage its "land-procurement exercise".
"The land cost today is making it difficult for dealers to invest. But if investments are not made, it will hurt us. We will buy sites where we want dealerships and workshops to come up in future," said Bhargava.
The company is sitting on a cash pile of about Rs 13,000 crore and the Rs 8,000-10,000-crore investment in the Gujarat plant will be made by its parent Suzuki.