Rumour: Maruti developing in-house 1.0L & 1.4L Diesel Engines

Maruti Suzuki is looking to bring its own 1.0 L and 1.4 L Diesel motors by 2015, reports CNBC Moneycontrol.com. 

Maruti currently uses Fiat diesel engines for the Swift, Ritz, Dzire, Ertiga and SX4, paying a royalty fee for every engine used.

The company went ahead and signed a 3 year deal in 2012 to source 100,000 1.3L MultiJet diesel engines a year from Fiat. 

Suzuki Powertrain India Limited (a subsidiary of Maruti Suzuki) already manufactures the 1.3L MultiJet Diesel under license from Fiat. It has an installed capacity of 3 lakh engines a year. Maruti has invested Rs 1,700 crore in a new diesel engine plant that is expected to go live by the second half of this year. 

The decision to procure Fiat engines for its cars was an inspired move that allowed Maruti to run away with the diesel market in India. However, at best, it can be seen as a stopgap arrangement, and far from one that makes for a permanent strategy. Competitors like Hyundai, Nissan, Honda, Toyota, Ford, VW, Chevrolet etc. use their own diesels.

There is inherent risk with being dependent on a 3rd party (and competitor) for engine supplies, not to mention the effect of royalty fees on thin profit margins. With its own motors in the pipeline, Maruti is unlikely to extend its agreement to procure Fiat engines beyond 2014. 

The sheer volumes make it feasible for Maruti Suzuki to develop its own diesel engine. Earlier reports had suggested that Suzuki Japan was developing an 800cc Diesel motor (codenamed E2). 

Fiat launched the MultiJet Diesel in 2003 and licensed the production to other companies in 70, 75 and 90 HP variants (production crossed 4 million units in 2011).