Isuzu Motor India signs MOU with AP government; To set up factory at Sri City
Japanese utility vehicle maker Isuzu has zeroed in on the Southern Indian state of Andhra Pradesh to set up its greenfield manufacturing facility. The Isuzu factory will come up at Sri City, an industrial corridor that abuts the Chennai-AP border. The location has been chosen keeping in mind the well developed port facilities of Chennai. Isuzu has signed a memorandum of understanding with the Andhra Pradesh government for the new factory. The Isuzu factory is expected to produce SUVs and pick up trucks for the Indian car and utility vehicle market.
The Isuzu factory is expected to begin production by 2015. The factory will have a yearly installed capacity of 100,000 units. Until production commences at its new factory in Sri City, Isuzu will continue to import its SUVs and pick up trucks from Thailand. The Japanese automaker is in advanced talks with Hindustan Motors to use the latter’s production line at Tiruvallur. Hindustan Motors’ Tiruvallur factory is expected to be used by Isuzu to assemble the MU-7 SUV and the D-Max range of pick up trucks through the completely knocked down(CKD) route.
CKD assembly is expected to reduce prices of the MU-7 SUV by more than 30%. Presently, Isuzu imports the MU-7 and the D-Max range as completely built units(CBU) from Thailand. CBU importation means that Isuzu pays the Indian government a hefty import duty on the MU-7 SUV, a factor that’s resulted in steep pricing of this luxury SUV. CKD assembly will reduce prices of this SUV, making it a lot more competitive against the likes of the Toyota Fortuner and the Ssangyong Rexton luxury SUVs. Isuzu has set up two dealerships in India, one at Hyderabad and the other at Coimbatore.
These dealerships sell the MU-7 and the D-Max range. In due course of time, Isuzu plans to open more dealerships across India. The next logical step for Isuzu Motor India will be to set up a CKD assembly operation in India as CBU import might not be sustainable, what with the recent increase in import duty effected by the 2013 Union Budget. Also, CBU imports will result in high cost of spares, a big deal breaker, especially in the utility vehicle segment.