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 to move towards sustained profitability.
India has been SMC's biggest market for cars but it is now also the biggest for two-wheelers. The country has replaced China as SMC's biggest two-wheeler market since 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 grow the two-wheeler business. Almost ten per cent of SMC's two-wheeler 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 two-wheelers also run Maruti Authorised Service Stations. In total, we have 30 touch points of Maruti that are associated with Suzuki 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 is higher than the remaining 430 dealers. The average sales for these 30 dealers is 1,450 two-wheelers a year against the average of about 1,000 units for the remaining dealers. Satoshi Uchida, managing director at Suzuki Motorcycle India, said that whenever the company wants to open a dealership at any location, the right of first refusal goes to Maruti Suzuki dealers. "If he doesn't opt for it, we go for another investor. That's an internal policy."
Rajasekharan said Maruti dealers have a very good knowledge of the automobile business and have been associated with the Suzuki group for a long time. Both the car and two-wheeler businesses have similar dealer management systems.
Most of the engines used by Suzuki's two-wheelers 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," said Uchida. Suzuki has invested about Rs 1,000 crore in the Indian two-wheeler business since 2006 when it started its India operations.
The company aims to sell 0.5 million two-wheelers in the current financial year and then double sales to a million by 2020 when Maruti is likely to sell two million cars. "If we materialise sales of half million units this year, we will start looking for a place to set up another plant. It takes time to get all the 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, adding, "We have to catch up. We have a dream to become like Maruti in motorcycles."
The company will focus on reaching out to rural areas and expanding the motorcycle segment's contribution, which currently stands at just one-fifth of sales while the rest comes from scooters. Rising volumes since FY17 have helped the company make a profit at an operational level. Volumes in the domestic market grew 12 per cent to 0.35 million units. In the first half of FY18, domestic volumes have surged over 50 per cent to 0.24 million units, giving the company a 2.3 per cent share of the domestic market.
R C Bhargava, chairman at Maruti Suzuki, says both Maruti and Suzuki Motorcycle are owned by Suzuki. "In our company, the ownership is 56 per cent and in motorcycle, it is 100 per cent. We have some common raw material sourcing contracts and due to our large volume, the two-wheeler business can get better rates. Manufacturing engines for them helps us increase our capacity utilisation," said Bhargava. He added that the company does all dealings with Suzuki Motorcycle at arm's length so that it does not affect Maruti and its shareholders in any manner.