Maruti Suzuki India Limited's board has approved a significant capacity expansion plan, sanctioning the acquisition of land at Khoraj Industrial Estate from Gujarat Industrial Development Corporation. The move represents a major step in the company's growth strategy as it seeks to meet rising market demand.

Board Approval Details

The board granted approval on January 12, 2026, for the land acquisition aimed at expanding production capacity. The company has outlined specific parameters for this expansion initiative, with detailed financial commitments and capacity targets.

Current Capacity Utilization

Maruti Suzuki currently operates with a total existing capacity of around 24 lakh units per annum across its manufacturing facilities in Gurugram, Manesar, Kharkhoda, and Hansalpur. The company has the capability to produce 26 lakh units per annum, which includes units produced at the erstwhile Suzuki Motor Gujarat Private Limited that has been amalgamated with the company.

The existing capacity is fully utilized, highlighting the need for expansion to meet growing demand. This high utilization rate underscores the company's strong market position and the necessity for additional production capabilities.

Investment and Implementation Timeline

The board has approved ₹4,960.00 crores specifically for land acquisition, development, and preparatory activities. However, the total investment required for the complete capacity installation and the period within which the proposed capacity will be added are yet to be finalized and will require further board approval while framing the phases of installation.

Strategic Rationale

The expansion decision is driven by growth in market demand, including exports. This strategic move positions Maruti Suzuki to capitalize on increasing domestic automotive demand while also strengthening its export capabilities. The company's choice of Khoraj Industrial Estate in Gujarat aligns with the state's automotive manufacturing ecosystem and infrastructure advantages.

The financing structure through a combination of internal accruals and external borrowings indicates a balanced approach to funding this significant expansion, leveraging both the company's strong cash generation capabilities and external capital sources.

Maruti Suzuki India shares experienced a notable decline on Wednesday, January 7, falling 3.7% to ₹16,654 and ending a six-day winning streak. The drop comes despite the automaker reporting strong December sales figures that exceeded market expectations.

December Sales Performance Beats Estimates

The company delivered robust sales performance in December, with total sales reaching 2.17 lakh units compared to street estimates of 2.12 lakh units. This represented a significant 22.2% year-on-year growth from the previous year's 1.78 lakh units.

Domestic passenger vehicle sales showed particularly strong momentum, increasing 37.5% to 1.78 lakh units from 1.30 lakh units in the year-ago period. The Alto and S-Presso models demonstrated exceptional performance with sales surging 92% to 14,225 units from 7,418 units in the previous year.

HSBC Maintains Buy Rating with Margin Warning

On Tuesday, brokerage firm HSBC maintained its buy rating on Maruti Suzuki with a revised price target of ₹18,500 per share. The analyst noted that the automaker's market share has normalised back to 40%, while the overall demand outlook remains buoyant.

However, HSBC emphasised that third and fourth quarter margins are critical for the stock's performance. The brokerage specifically warned that Earnings Before Interest and Tax (EBIT) margins below the 10% mark could disappoint the market. Additionally, HSBC identified commodities as posing a near-term risk for the stock.

Analyst Coverage and Stock Performance

The stock maintains strong analyst support across the investment community. Of the 49 analysts covering Maruti Suzuki, 38 have assigned buy ratings, seven maintain hold ratings, and four have sell ratings.

Despite Wednesday's decline, the stock has delivered impressive returns over the past month, rising 43%. The shares hit the day's low during trading, reflecting investor concerns about margin sustainability despite strong sales momentum.