Maruti Suzuki in discussions with Fiat SpA

In order to keep up with surging demand, Maruti Suzuki India Ltd. is in discussions with Fiat SpA for the purchase of diesel engines from Fiat SpA’s local unit. “There has been an unprecedented rise in demand for diesel vehicles, mainly because of the pricing of the fuel. Since Fiat has spare capacity, we are evaluating buying engines from them,” said Maruti Chairman R.C. Bhargava. “As much as 85% of sales of some models are in diesel now,” he added. Maruti is currently testing its cars with Fiat’s diesel engines. If all goes well, a deal may be finalized within the next two to three months. Fiat India’s joint venture with Tata Motors Ltd. (TTM) can produce up to 250,000 diesel engines annually at its Rajangaon factory in Maharashtra state. The price of diesel fuel in India is significantly lower than that of gasoline because it receives government subsidy. Maruti is cautious about its plans regarding diesel cars. Bhargava said it’s hard to predict diesel car demand in India in the coming years because it all depends on government policies. “At this point, we don’t really know if it is prudent to make substantial investments in this scenario,” he said. (August 20, 2011)