Japanese carmaker Suzuki is drawing aggressive plans to sell five million vehicles in India by 2030 through Maruti in an attempt to remain the market leader with a 50 per cent share. This will be a near three-fold jump from its current sales volume and the auto major, which sits on a cash pile of $13 billion (including Maruti’s $5 billion) is getting ready to invest further in its most promising market.
It expects the Indian market to grow to 10 million units annually by 2030 and it intends to control half the market then, like it does now. “The group will reinforce the sales network and service network globally. In India, in particular, although we currently have acquired the majority share in the passenger car sector, we would like to secure the majority share even in 2030. We will proactively deal with ways to realise this in detail,” said Suzuki Motor Corp (SMC) noted in its latest annual report released last week.
SMC has already invested Rs 134 billion in a Gujarat facility, its first in India. It is now looking to invest Rs 90 billion in a new manufacturing unit in Gujarat. The existing unit at Hansalpur makes cars that get sold through Maruti Suzuki network. The existing plant will produce 750,000 units when the third phase becomes operational in about a year.
A senior Gujarat government official told Business Standard that the company has bought a private land adjacent to the existing plant. “All such large industries get three kinds of benefits from the government including a subsidy for skill development, concession in power tariffs for initial years and refund of state goods and services tax (SGST), as compared to VAT refund under the previous tax regime.” The SGST refund is for cars sold in Gujarat. According to the official, the new plant may employ 6,000 people directly and will have a total annual capacity of 750,000 cars, set up in a phased manner.
R C Bhargava, chairman at Maruti Suzuki said India is a key market for SMC and will become more critical going forward. “We are going to try and retain our market share. While nobody can predict what is going to happen, we will make out best efforts”. He also said the current site of SMC’s Gujarat unit may be able to add fourth line to reach a capacity of one million cars in future.
SMC, which exited the world’s second-biggest car market, US, in 2012, has recently decided to pull out from China, the biggest car market. The Japanese brand, which operated in China through two joint ventures, manufactured only 86,000 units last year and sales continued to be under pressure with a declining pressure for compact cars in the country.
SMC expects that in or around 2030, there is a possibility that India would grow up to be a market of 10 million units annually from 3.2 million units at present. “If we are to maintain the current market share of 50 per cent, Suzuki would become five million units (in 2030),” the report said. SMC expects that by then it may be selling two million units in markets outside India, making for a total volume of seven million units.
This also shows that SMC’s reliance on the Indian market will continue to expand. At present, India brings a little over half of its annual car sales of 3.22 million units. If we go by SMC’s own estimates, India may account for almost seventy per cent of its total expected volume of seven million units by 2030. In India, the Japanese auto major earned a record Rs 55.75 billion in royalty and dividend income from Maruti in FY18.
The recent events only reinforce the rising significance of the Indian market for SMC and it is expected to commit more resources to retain its share here. Ashim Sharma, partner and group head at Nomura Research Institute Consulting said the market leader will need to ride the wave of transformation (coming in form of connected, shared and electric mobility) more effectively that rivals to maintain its lead. “Based on the actions taken in products, R&D, sales and marketing, Maruti Suzuki does seem poised to move towards this goal over the next decade or so,” he added.