Chennai, Jul 31 (IANS): Automobile major Maruti Suzuki India Ltd has decided to acquire Suzuki Motor Gujarat Pvt Ltd (SMG) from its Suzuki Motor Corporation (SMC) for a sum to be arrived at later, a top official said.

Briefing reporters about the Board of Directors' decision, Chairman R.C.Bhargava said the SMG was set up as a 100 per cent contract manufacturer for Maruti Suzuki India in Gujarat in 2014.

Over the years, the dynamics of the automobile industry has changed with several powertrain technologies like electric vehicles (EV), hybrids, CNG, ethanol and others.

"Managing this scale and complexity of production with multiple powertrains, under different managements, would pose several challenges," the company said.

"The Board of Directors considered this and decided that for the purpose of efficiency in production and supply chain, it is best to bring all production related activities under MSIL (Maruti Suzuki India Ltd)," the Indian company said.

Bhargava also said the contract manufacturing agreement between Maruti Suzuki India and the SMG will be terminated. Last fiscal, SMG clocked a turnover of Rs.31,852 crore up from Rs.24,440 crore in FY22 and Rs.15,850 crore in FY21.

The transaction is expected to be completed before March 31, 2024. As per the contract manufacturing agreement, Maruti Suzuki India could buy SMG at the book value.

The book value is about Rs.12,755 crore, Bhargava said.

Maruti Suzuki India has a production capacity of about 2 million and it needs to increase that to 4 million by 2030-31 and the company is looking at various locations.

Meanwhile, Maruti Suzuki India closed the first quarter with a total income of Rs 33,328 crore (Q1FY23 Rs 26,588 crore) and a net profit of Rs 2,485 crore (Rs 1,012 crore).