Maruti Suzuki's Gujarat plans could run into headwinds

Maruti Suzuki will handle Japanese automaker parent, Suzuki Motor Company's export push into the Middle East and African markets. With the Indian car market primed to grow significantly over the next few years, Maruti will need additional capacity to meet Suzuki's export requirements. The additional capacity is touted to come from the car maker's proposed factories at Gujarat, a state known for its well developed port infrastructure and adequate power facilities for industrial units. 

Maruti is expected to have two manufacturing locations at Gujarat: Mehsana and Vithlapur, facilities that will mirror the car maker's approach at Haryana, where it also has two facilities: Gurgaon and Manesar. While a 700 acre land parcel at Mehsana has been allocated to Maruti by the Gujarat government, another 700 acre parcel at Vithlapur has been independently acquired by the car maker for a second factory in the western state.

Even as the Gujarat facilities are yet to receive the investment go-ahead from the Maruti Suzuki board on the back of slow sales, the car maker could be running into significant headwinds as Gujarat's farmers are protesting against the land allocation at Mehsana. The farmers protest has meant that the Gujarat government of the day has downsized the Special Investment Region (SIR), from 500 square kilometers to 100 square kilometers.

This downsizing has meant that the SIR, which originally comprised the land of 44 villages, now comprises of just 8 villages. According to the EconomicTimes, the villagers belonging to these 8 villages are opposing the allocation of their farm land to Maruti Suzuki, preferring to continue farming rather than giving up their land for the car factory. If the villagers are successful in their protests, the land notified by the Gujarat government for Maruti Suzuki might have to be returned to the villagers, thereby proving to be a major set back to the car maker's expansion plans in that state.

With Maruti's slowing down domestic sales and the expansion at Manesar (which will take care of short term capacity requirements), the car maker might not mind the downsizing at Gujarat after all. The last major farmer protest that led to a car factory being cancelled was at Singur, West Bengal. Back then, Tata Motors had to move the Nano factory proposed to be built originally at Singur, West Bengal, to Sanand, Gujarat. 

Currently, Maruti Suzuki produces 1.2 million cars each year, with the Gurgaon factory capable of producing 600,000 cars per year while the Manesar factory is being expanded to produce 850,000-900,000 cars per year. With the Manesar expansion in place, Maruti will have an installed capacity of nearly 1.5 million cars each year. The two facilities at Gujarat, if they see the light of the day, will add another 1.5 million cars to the total production volume. The new factories at Gujarat would required a minimum of 3 years to begin production.