Suzuki bets big on India for its record sales target

Intends to sell 3.7 mn units globally by 2025, with 67% contribution from Asia

Suzuki Motor Corporation (SMC), Japan’s fourth-largest carmaker, is betting big on a recovery in the Indian market to fulfil its record sales target of ¥4.8 million by 2025.

SMC is the parent company of India’s largest carmaker Maruti Suzuki, which is also the single-largest volume generator for the Japanese giant. India generates more than twice the volume generated by SMC’S home market of Japan.

Suzuki added that it intends to be aggressive in electrification of its cars in India, marking a change in its stance. The company had earlier decided to put its electric vehicle plans on the backburner even as most other passenger vehicle makers are going full throttle with their plans, thanks to the government’s policy push.

The company had, instead, decided to focus on alternative technologies, including compressed natural gas (CNG) and hybrid, to reduce the overall carbon footprint and meet advance emission norms.

“In India, Suzuki will take the initiative in promoting electrification as required by society in order to tackle environmental issues, and maintain market share of more than 50 per cent in the passenger car segment,” Suzuki said in a presentation to its investors.

In its presentation, the Japanese carmaker said it intends to sell 3.7 million units by the end of 2025. Of this, the company expects Asia to contribute 2.5 million units or 67.5 per cent of its global volumes. Given the trend of India producing 50 per cent of its volumes, it expects the country to produce 1.85 million units by 2025.

In FY20, India’s share in the Japanese giant’s worldwide automotive sales stood at 50.35 per cent, reporting sales of 1.43 million units, while in FY19 the figure was 52.72 per cent.

Suzuki said it intends to increase the number of outlets in India’s rural regions, increase sales of CNG cars, and strengthen the SUV segment in which Korean giant Hyundai’s India arm has overtaken it in terms of market share.

It will also deepen its partnership with Toyota to develop hybrid vehicles and develop an EV platform.

The significance of India operations is visible in the company’s fortunes, given that SMC attributed the drop in its operating income to the slump in India sales, and the impact of Covid-19 in the Indian market.

The country’s automobile market was closing one of its worst years when the pandemic struck, forcing a lockdown. Auto sales dropped to zero in April last year.

Enthused by the potential of the country, Osamu Suzuki, chairman of Suzuki Motor, had announced in 2018 that the firm expected annual sales in India to grow to 10 million by 2030, with Suzuki controlling half the market.

This led the automaker to invest in a new plant in Gujarat, with a capacity of 750,000 vehicles a year.

A second plant, with a similar capacity, was planned in Gujarat — to grow Maruti Suzuki’s total capacity in India to 5 million vehicles a year.

However, the company had to defer the plan as the Indian market saw a continuous decline in sales since 2019, with Covid-19 worsening fortunes.

India’s automotive sector has been facing headwinds for several quarters, and Covid has only added to woes.

Vehicle manufacturers have been witnessing a double-digit decline in sales since the second half of FY19 on account of the economic slowdown, higher insurance costs, and an increase in vehicle prices thanks to the transition to new safety and emission norms.