India’s Largest Car Maker Maruti Suzuki to Set Up Shop in Africa

Maruti Suzuki
Maruti Suzuki

AFRICANGLOBE – Maruti Suzuki India, India’s biggest car maker by volume, is on the prowl for new export markets and plans are afoot to set up a new assembly plant in Africa.

Chairman R.C. Bhargava told reporters that countries that were “on the cusp of motorization” were key to Maruti’s plan of doubling exports in the next four years.

He did not identify any specific country in Africa but countries with good infrastructure and good economic growth would certainly attract the company.

“We will look at local assembly for two reasons,”Bhargava said. “Firstly, there’s usually a tax advantage. And second, there’s pressure from governments in these countries to assemble models locally.”

It has emerged that the company prefers to invest in Africa as opposed to Europe.

Africa’s economic expansion was beating Europe and the US. Researchers at the World Bank and the African Development Bank (AfDB) this week said the growth is being driven by mobile phone technology, which has opened up access to banking, education and other key services.

World Bank director for sustainable development in Africa, Jamal Saghir, said foreign direct investment is booming on the African continent and it is now an easier place to do business.

But Maruti said Europe was struggling to recover from a slowdown and setting shop in those countries would not be profitable at this stage.

And it never rains but it pours in Europe as the solution to its debt problems seems to be far from being found.

The latest news is that Eurozone crisis is threatening to flare up again as outgoing Italian Prime Minister Mario Monti held talks with centrist politicians over the agenda for reform which he published on Christmas Eve.

Some analysts believe Monti could assemble a coalition for next February’s general election, setting up a battle with his predecessor Silvio Berlusconi.

But Jens Weidmann, the president of Germany’s Bundesbank, warned Italian politicians that the country could not afford to stray from the reform path taken by Monti during his 13 months in power.

“Italy suffers from low growth, low productivity and lack of innovation. But under the Monti government Italy has set ambitious goals for reform in order to regain the confidence of investors, and had success with it,” said Weidmann.

Bhargava said an African-based manufacturing facility would help Maruti drive down costs for buyers and boost sales in these emerging markets for basic models such as the Alto and M800.

But analysts believe the automaker may face hurdles setting up any production facility overseas as a few countries may mandate local purchase of some components.