Market leader Maruti Suzuki has taken a seemingly bold decision to make further steps on the diesel car market. The Japanese car maker announced the strategic move of constructing a diesel engine plant with license from the current engine partner- Italy’s Fiat. The new engine plant will be constructed at Gurgaon.
Maruti’s announcement is the first breaking decision taken by a car maker in India on further step on the diesel car front. The automobile firms were adopting a wait and watch policy because of the uncertainty regarding the stability of the government’s diesel price policy.
In the budget, the government hasn’t introduced the much feared excise duty hike on diesel cars. Besides, diesel prices were also not revised because of political compulsions. All these have consolidated the position of diesel cars vis a vis petrol cars.
Other car makers in the industry are yet to design the next move. Toyota Motor Corporation and Volkswagen, before the budget made it clear that they are thinking about a diesel engine plant, but decision will be taken only after the budget.
Firms other than Maruti are less convinced about the life of the present diesel subsidy policy. Many analysts expect that when political pressure is released, the government may increase or deregulate diesel price and thus eliminating the price advantage for diesel.
Though the diesel engine plant is the not the only notable item of the Maruti’s Rs 4100 crore capital expansion plan for 2013. The company has provided a significant amount of Rs 900 crore to its R&D centre at Rohtak under the new plan. The Rohtak research centre is the only R&D platform for the company outside Japan.