Now, Suzuki rides on Maruti to expand two-wheeler biz

Suzuki Motor Corporation (SMC), which owns the country’s biggest carmaker, is effectively using the strengths of Maruti to expand its two-wheeler business in the world’s largest market and is moving towards sustained profitability.

India has been SMC’s biggest market for cars but it is now also the biggest market for two-wheelers. The country replaced China as SMC’s biggest two-wheeler market last year. India now accounts for close to one-fourth of SMC’s global two-wheeler sales of 2 million units. SMC is consciously exploiting synergies with Maruti Suzuki to expand the two-wheeler business. Almost 10 per cent of SMC’s twowheeler sales in India now come from dealerships run by investors who also own Maruti Suzuki outlets and Maruti Authorised Service Stations.

“Eleven Maruti Suzuki dealers are also dealers of our two-wheelers. Another 19 dealers of our twowheelers also run Maruti Authorised Service Stations. In total, we have 30 touch points of Maruti which are associated with Suzuki’s two-wheeler business,” said Sajeev Rajasekharan, executive vice-president (sales and marketing) at Suzuki Motorcycle India, which has 460 sales outlets.

It is interesting that the average sales volume clocked by these 30 Suzuki Motorcycle dealers are higher than the remaining 430 dealers. The average sales for these 30 dealers are 1,450 two-wheelers a year against the average of about 1,000 units for the remaining 430 dealers. Satoshi Uchida, managing director of Suzuki Motorcycle India, said whenever the company wants to open a dealership at any location the right of first refusal goes to the Maruti Suzuki dealer. “If he doesn’t opt for it, we go for another investor. That’s an internal policy.”

Most of the engines used by Suzuki’s twowheelers in India are manufactured by Maruti at its Manesar plant. “We have common raw material suppliers. In future, we have to work with Maruti on software development, automatic driving and connected vehicles,” Uchida said. Suzuki has invested about ~1,000 crore in the Indian two-wheeler business since 2006, when it started its India operations.

The company aims to sell half a million two-wheelers in the current financial year and then double sales to a million by 2020 when Maruti is likely to sell 2 million cars. “If we materialise sales of half a million units this year, we will start looking for a place to set up another plant. It takes time to secure all approvals,” said Uchida. “The current plant at Manesar can produce up to a million units annually. We are a young company (compared to Maruti),” he said. “We have to catch up. We have a dream to become like Maruti in motorcycles.”

Volumes in the domestic market grew 12 per cent to 0.35 million units. In H1 of FY18, domestic volumes surged over 50 per cent to 0.24 million units, giving the company a 2.3 per cent share of the domestic market.

RC Bhargava, chairman of Maruti Suzuki, says both Maruti and Suzuki Motorcycle are owned by Suzuki. “In our company the ownership is 56 per cent and in motorcycles it is 100 per cent. We have some common raw material sourcing contracts and due to our large volume the two-wheeler business can avail better rates. Manufacturing engines for them helps us increase our capacity utilisation.”