Business Standard: February 13, 2017
New Delhi: The strong double-digit ride is set to make India a bigger market for Suzuki Motor Corporation (SMC) in value than Japan, its home market. SMC’s Indian subsidiary, Maruti Suzuki, already sells more vehicles than SMC in Japan, and enjoys a greater market capitalisation over its parent. SMC is faced with a declining market in Japan, whereas its Indian subsidiary is seeing a capacity constraint, leading to a waiting period of several months for some of its best-selling models.
On overtaking SMC’s Japan revenue in the near future, Maruti Suzuki chairman R C Bhargava said, “This is not something that will come as a surprise to us. The home market of Suzuki (Japan) is stagnant. Our numbers will continue to grow faster.”
The sales revenue gap between Suzuki’s Japan and India operations narrowed down to $600 million in FY16, from $2.55 billion in FY15. In these two years, SMC’s Japan revenue grew 2 per cent to $9.29 billion, while Suzuki’s India net sales went up 33 per cent from $6.55 billion to $8.69 billion, data from SMC showed. This reduced the gap in revenue between Japan and India. Both SMC and Maruti Suzuki follow the April-March financial year.
SMC’s Japan revenue and India revenue also include its two-wheeler business, though Maruti Suzuki only operates the passenger vehicle business and the two-wheeler business is a separate subsidiary. The two-wheeler business is much smaller in India and accounts for annual revenue of about Rs 1,900 crore or about $280 million.
In the first quarter of the current financial year, SMC’s Japan revenue grew by a mere 1.1 per cent to 250 billion yen. This translates to Rs 15,625 crore. Maruti Suzuki’s net sales in the same quarter rose 12 per cent to Rs 14,654 crore. If we include the quarterly two-wheeler revenue of Rs 500 crore (approximately), the India revenue exceeds Rs 15,000 crore in Q1.
The Indian subsidiary’s net sales in the first half (H1) increased 21 per cent to Rs 32,280 crore as it sold 10.4 per cent more vehicles than the previous year. Other than the volume increase, a better product mix and lower discounts improved Maruti’s average realisation per vehicle in H1, FY17 to Rs 4,21,000, up 9.64 per cent from FY16, and contributed to higher sales revenue.
While SMC is yet to announce its Q2 results, Maruti Suzuki’s Q2 net sales have surged over 29 per cent to Rs 17,594 crore. SMC’s production in Japan declined 10.6 per cent during H1, due to declining sales in both domestic and export markets. With this decline, the H1 revenue from Japan is estimated to be at par or even lower to the India.
The H2 of the year will be more interesting and Maruti Suzuki’s capacity constraint will get eased with the commencement of production at its Gujarat unit in January next year. The new plant, in the first phase, will add an annual capacity of 250,000 units to the existing capacity of 1.5 million units between the company’s two plants at Gurgaon and Manesar in Haryana. The third plant will further expand Maruti’s volume and sales revenue.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.