Maruti shares jump on Volkswagen, Suzuki deal

9 Dec 2009, 1424 hrs IST, REUTERS



 

BANGALORE: Shares in Maruti Suzuki Ltd rose as much as 3.8 per cent on Wednesday after parent Suzuki Motor said Volkswagen will take a 19.9 per cent stake.



Suzuki has a 54.2 per cent stake in Maruti. Officials at Maruti could not immediately be reached for a comment on the deal.



Volkswagen will buy the Suzuki stake for about 222.5 billion yen ($2.5 billion) as part of an alliance between the two automakers.



At 12:50 pm, shares in Maruti were up 2.6 per cent at Rs 1,610 in a BSE that was down 0.7 per cent. The stock had risen as much as 3.8 per cent soon after the announcement.



Suzuki, Japan's fourth-largest automaker, said it would hold a news conference at 0800 GMT to brief on the capital alliance.



Maruti was founded by Suzuki and the Indian government back in 1982.



In order to hold on to its 50% share of the Indian car market, Maruti Suzuki has planned to increase its production capacity by up to 75% over the next five years.





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Maruti will have a capacity to build one million cars by the end of this fiscal year when its second plant in Manesar is ready.



This will be the biggest capital expenditure by Maruti Suzuki since its Rs 9,000-crore investment announced in 2006.



The company has drawn up ambitious plans to defend its market share in the face of increasing competition in the country’s red-hot small car market, which accounts for close to 80% of all passenger vehicles sold here and is dominated by Maruti.



It’s already under attack from Tata Nano, the world’s cheapest car, that hit the market earlier this year.



Also, India has become one of the most sought-after car markets with companies such as Toyota, Honda, Volkswagen and Ford set to roll out entry-level compact cars over the next couple of years.



But Maruti mostly held on to its market share in recent years by launching a flurry of highly competitive products and making big inroads into the rural and semi-urban markets.

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