Maruti Suzuki India, India's leading car manufacturer, is tightening its grip on the domestic market by tapping into the increasing diesel car sales.
According to Business Standard, Maruti is planning to invest Rs 1,700 crore in the diesel engine manufacturing facility in a bid to notch up the current production of diesel vehicle. The company is aiming to increase diesel vehicle sales over the next three years to at 43 percent, up from 38 per cent of its overall sales.
The report also said that the discounts offered by Maruti will be cut down due to increased diesel car sales. The company's new plant, which has the capacity of manufacturing 3, 00,000 diesel engines will partially start operations this year, said the report.
"With sluggish demand for petrol cars, average discounts during the second quarter shot up to an all-time high of Rs 14,750, 30-40 per cent higher than the discounts offered usually. This had a hit of 100 basis points on our margins. The change in the product mix in favour of diesel vehicles would help improve profitability. There are no discounts on diesel vehicles. We have also increased sales of the new Alto, for which there are no discounts," said Chief Financial Officer Ajay Sheth according to The Business Satndard.
The auto market has recorded a growth of 40 percent diesel vehicle sales in the first eight months of the current fiscal year, while the demand for the petrol models have gone down by 16 percent. Currently, the company holds a backlog for models like Swift, DZire and Ertiga.
"We had a production loss of 77,000 units due to the lockout at Manesar. But work was underway at Suzuki Powertrain. We would try to recover the lost numbers in the third and fourth quarters,"Sheth added.