According to reports, the leading passenger car maker of India, Maruti Suzuki, is planning to completely utilise its production capacity for manufacturing more diesel engines instead of relying on Fiat. It was reported that Maruti Suzuki might clamp down on the diesel engine supplies of Fiat as it plans to operate its facility in full steam. Also to mention, industry experts are saying that other reason behind this move is the slow demand prevailing in the Indian car market, which has forced several major car companies to curtail their production plans.
Commenting on this development, Kenichi Ayukawa, Managing Director and Chief Executive Officer at Maruti Suzuki India Limited, was quoted as saying, “We will continue to keep our relationship with Fiat with regard to supply of engines. However, we will see the market situation for the demand and future sourcing of diesel engines from the Italian company." He also hinted that the future diesel engine sourcing from Fiat will depend on the market situation. Reports have suggested that Maruti Suzuki will be cutting down on its diesel engine supplies by half owing to stagnant market conditions.
It must be noted that the leading car brand of India had signed a three-year agreement with Italian car manufacturer Fiat to source the 1.3-litre diesel engine from its Ranjangaon plant. The diesel powertrains supplied by Fiat are featured in the flagship models of Maruti Suzuki that include Swift, Swift DZire and Ritz. As told by a company insider, during 2011-2012, Fiat supplied 100,000 diesel engines to Maruti Suzuki, but last year the figure came down by a slight margin and this year, the figures could further worsen. While assessing the industry estimates, the demand for diesel vehicles have taken a hit during the July-September time period as it dropped by 53 per cent as compared to the year ago figures of 63 per cent. The main reason cited behind this is the steep rise in diesel prices, which has narrowed the gap between fuel prices.
Since 2007, Maruti Suzuki has been producing the 1.3-litre multi-jet diesel engine of Fiat at its Manesar facility through a licensing pact with the Italian major. A thing to note here is that the Manesar plant of Maruti Suzuki has an annual production capacity of rolling out 300000 units. The sourcing of engines from Fiat mainly depends on the demand, as stated by Suman Maitra, Chief Operating Officer for Maruti Suzuki. "Our agreement to source the number of engines depends on the domestic market conditions and the demand coming for our diesel variants. We had no annual fixed engine units to be sources from their Pune plant," she added later.
Since the slowdown in Indian car market has affected the demand for diesel cars, Maruti Suzuki is now aiming to manufacture more and more diesel engine from its own facility. Earlier this year, the company had to shut down on the third shift at the engine engine facility due to the falling demand. It has also put on hold the expansion plans of diesel engine unit at Manesar ever since diesel cars lost out on its sheen because of narrowing fuel gap.
