Facing a production can and increasing demand for the diesel cars has put India’s largest car maker in a fix. In order to counter this, Maruti Suzuki India has finalised a deal to buy diesel engines from Italy’s Fiat.
Fiat will supply up to 1 lakh diesel engines per year to Maruti. With this deal Maruti plans to raise Swift hatchback output from January 2012. It could also help to bring down the demand for Swift Dzir and other cars which use the 1.3 Multijet engine.
The recent rises in petrol prices have boosted demand for diesel cars, but Maruti did not have capacity to meet the demand. Earlier this month, Maruti raised diesel car prices by up to Rs 10,000 rupees, taking advantage of the demand for the segment as input costs continue to go up.
Maruti is facing tough competition from global car makers such as Hyundai Motor Co, Ford Motor Co, General Motors Co and Honda Motor Co and has seen its market share slide to just over 40 percent.
This deal will also help the Italian car maker which is trying to make a mark in India. The deal will help Fiat reduce its losses and also utilise the spare production capacity.
The multijet currently powers the Maruti Swift, Dzire, SX4 and the Ritz.