Inside The Rs 65,000-Crore Capex Plan Of India's Top Carmakers
Maruti Suzuki to Tata Motors, Indian carmakers are budgeting for higher capital expenditure, buoyed by all-time high demand.
Indian carmakers are budgeting for higher capital expenditure over the next few years, buoyed by all-time high demand for passenger vehicles.
The nation's passenger vehicle industry is projected to grow 21-24% year-on-year to 3.7–3.8 million units in the fiscal ending March 31, ratings agency ICRA Ltd. said in a report. Capacity utilisation reverted to pre-pandemic levels in the July–September quarter amid an easing global chip shortage. The trend is likely to sustain for at least the next two financial years.
Against that backdrop, ICRA expects India’s top original equipment manufacturers to spend Rs 20,000 crore annually over the next three to four years to augment capacity for product development, including electric vehicles, as well as meet new fuel, emissions, and safety norms.
In all, ICRA expects carmakers to invest around Rs 65,000 crore by FY25 to ramp up production capacities.
“While capex outlay is likely to increase significantly, a majority of it will be met through healthy cash accruals and parent-funding support, apart from inorganic fundraise…,” ICRA said in the report. “Thus, an increase in leverage is likely for most of the OEMs.”
Here’s a look at which carmaker plans to do what in the near future:
Maruti Suzuki: India’s largest carmaker by market share, aims to increase its production capacity by 100,000 units by the end of FY24 and 250,000 units by the end of FY25. The firm will increase the production capacity of its Manesar plant by 100,000 units. The Sonipat plant will commence operations in 2025.
Mahindra & Mahindra: The Scorpio maker remains upbeat on its diesel plans and aims to ramp up its total SUV capacity to nearly 600,000 units annually over the next 12–15 months. It aims to spend nearly Rs 8,000 crore as capex over three years ending in FY24.
Tata Motors: The Nexon maker plans to spend Rs 6,000 crore to increase the production of passenger vehicles as well as commercial vehicles. Similarly, Rs 725 crore has been set aside to bring Ford’s Sanand plant, which was acquired recently, onstream.
Hyundai India: The South Korean carmaker plans to invest nearly Rs 4,000 crore as part of its plan to introduce electric vehicles by 2028.
Kia Motors: The company plans to increase production in India to 400,000 units by the end of FY23, largely aided by efficiency enhancement rather than capacity addition.
Over the past couple of years, India's auto industry has been beset with twin shocks—first the pandemic-induced lockdown, followed by the global chip shortage. It is only now that people are buying cars again for personal mobility. SUVs have emerged as the vehicle of choice, and CNG is the fuel of choice. EV penetration remains low, albeit growing at a fast clip.