India's largest car maker Maruti Suzuki India has finalized a deal to buy diesel engines from Italy's Fiat. Fiat will supply up to 100,000 diesel engines per year to Maruti. With this deal Maruti plans to raise Swift hatchback output from January 2012.

Mr RC Bhargava chairman of Maruti said that 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 INR 10,000 rupees, taking advantage of the demand for the segment as input costs continue to go up. Mr Bhargava said that "We have a waiting list of diesel cars and we have surplus capacity of petrol cars.”

Maruti which until last year sold nearly every other car in India, faces 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%

Maruti, which has installed capacity to make about 1.5 million cars a year, is expanding one of its existing plants to reach 1.75 million annual capacity.

Mr Bhargava said that the company is in the process of buying land to build a new factory in Gujarat, but will start work at the plant depending on the demand scenario and when it feels it needs to expand capacity beyond 1.75 million.

(Sourced from ET)