Why did Maruti choose Gujarat for setting up a second million-car unit? RC Bhargava explains
RC Bhargava, Chairman, Maruti Suzuki, says: “We have preferred Gujarat because we have already established for the first site, a vendor base for all the components. These components today are catering to a demand for 750,000 cars a year. If we can make this to 2 million, there would be significant improvements in the economies of scale and therefore lower cost of production of components. And as components are close to 70% of the cost of a car, any reduction in the component cost is a major advantage to us. Secondly, we are going to more than triple exports by the end of this decade. The export of cars is largely taking place through a port in Gujarat.”
We are speaking at a time when the Vibrant Gujarat Summit is underway and you have talked about expanding your presence there. What is the rationale for picking up the same state for the next one million units as well? Have you been that comfortable and successful in Gujarat?
RC Bhargava: Well let me clarify, the MOU at the moment says that Gujarat is our preferred state for expansion by another one million units a year Now we have preferred Gujarat because we have already established for the first site, a vendor base for all the components.
These components today are catering to a demand for 750,000 cars a year. If we can make this to 2 million, there would be significant improvements in the economies of scale and therefore lower cost of production of components. And as components are close to 70% of the cost of a car, any reduction in the component cost is a major advantage to us.
