China in doubt, all roads lead to India for Suzuki

MUMBAI: Suzuki Motor Corp. may be exiting China and that is good news for India.

Unlike Indian consumers’ abiding love affair with Suzuki cars, sales of the company’s vehicles in China have plunged after a promising start. Quitting China will allow the Japanese carmaker to free up resources and focus more attention on India, its most lucrative market.

Nikkei Business on Thursday reported that Suzuki and its Chinese partner, Chongqing Changan Automobile Co., will disband their joint venture, with Suzuki selling its stake to the local manufacturer.

Shares of Suzuki dropped 4.8% in Tokyo on Thursday, the most since August 9. But, unit Maruti Suzuki India Ltd rose 1.3% on BSE, a reflection of what investors think will be the fallout of the move.

The process of dissolving the partnership will start with approval from Chinese authorities and could be completed by the year-end, with Changan continuing to make Suzukibrand vehicles under licence, according to the Nikkei report.

Bloomberg cited Suzuki spokesman Satoshi Kasukawa as saying that the company’s stance hasn’t changed and it continues to discuss with Changan about future growth of the partnership.

Suzuki’s move to exit China, if true, means it will no longer be present in the world’s top two markets as the auto maker exited the US in 2012. With a minuscule presence in Europe and in its home market, the company is facing a prolonged slowdown and cutthroat competition

from Daihatsu in the mini-car segment.

Effectively then, India remains its only white knight and one that is in supreme health.

Maruti shares have been on an upward curve and have risen nine times since July 2012, when a labour strike crippled production at its plant in Manesar, Haryana, and mob violence led to the death of one of its managers.

Maruti didn’t respond to an email seeking comment till press time.

Suzuki controls 51% of India’s car market through Maruti, which means it literally sells every second car in the country. Net profit at Maruti has doubled in the last three years and it clocks about ₹2,000 crore in net profit on a quarterly basis. Its brand recall is at an all-time high.

The unit now contributes more than 50% of Suzuki’s consolidated profit from about 30% six years ago.