Maruti’s global footprint has also been given a boost thanks to its Japanese parent’s alliance with Toyota where the two have been collaborating on new products, technologies and reaching out to more global markets.Maruti Suzuki’s exports to Japan are growing but still “less than 20 per cent” of overall output, with more than half going to the Middle East and Africa.
Total exports from India for the April-June period “exceeded” 90,000 units, the top management of Suzuki Motor Corporation told analysts in Japan following its first quarter results for this fiscal. The models shipped from India to Japan include the Baleno, Fronx and Jimmy with the recently unveiled e Vitara now being added to the list.
Indian-made models such as Swift, Baleno, Fronx, and Dzire, which are fuel-efficient, affordable and durable, are popular in South Africa and Saudi Arabia.Suzuki Motor Corporation Management
In the Middle East and Africa, Maruti uses the Suzuki dealership network to export vehicles mainly produced back home in India. “Indian-made models such as Swift, Baleno, Fronx, and Dzire, which are fuel-efficient, affordable and durable, are popular in South Africa and Saudi Arabia,” said the management during the Q&A session.
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In Saudi Arabia, demand for small cars is rising due to a large youth population and more women entering the workforce, despite the market traditionally favoring trucks and large vehicles. “In South Africa, the market was also truck-centered, but there is a growing emphasis on fuel efficiency and durability, and sales of Swift and Fronx are strong,” said the Suzuki management.
Toyota factor
Maruti’s global footprint has also been given a boost thanks to its Japanese parent’s alliance with Toyota where the two have been collaborating on new products, technologies and reaching out to more global markets like Latin America and Africa. The Toyota-Suzuki partnership has steadily been growing from strength to strength and is now a formidable force to reckon with in India.
Maruti Suzuki’s sales for April–June were down six per cent with the A segment comprising hatchbacks and sedans leading the slide with (minus) 10 per cent and the B segment (SUVs and MPVs) with minus one per cent. Clearly, small cars were more affected during the quarter and Suzuki could perceive that households with annual incomes of ₹500,000 to ₹20 lakh were facing “tough disposable income conditions”.
In South Africa, the market was also truck-centered, but there is a growing emphasis on fuel efficiency and durability, and sales of Swift and Fronx are strong.Suzuki Motor Corporation Management
As part of its effort to recover in the second half, Suzuki has decided to launch two SUV models, one of which is the e Vitara whose production began in Gujarat on Tuesday, while the other offering will follow soon thereafter. According to Suzuki, Maruti’s market share in the A segment exceeds 60 per cent but is below 20 per cent in SUVs. This “large gap” will be bridged once there are more SUVs rolling out of Maruti’s plants in the coming years.
Middle-class woes
“The economic environment in India is tough, the middle-class has limited disposable income, and the market is shifting to SUVs, so we are planning to expand our SUV lineup. We hope to boost sales through an improved economic environment and the launch of new SUVs,” said Suzuki.
Normally, SUVs are more profitable than passenger cars but the company added in the analysts call that it would also need to overcome increased raw material costs as well as higher depreciation and labour costs due to the new Kharkhoda plant in Haryana. This facility started operations in February this year and is gradually ramping up production with two-shift operations now in place.
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Right now, the Indian landscape is seeing the middle class in urban areas struggling with low disposable incomes. “Sales are sluggish but in rural areas, crops are growing well, money is circulating, and sales are good. Due to uncertainty about the outlook, we have reduced market inventory by about 10 per cent year-on-year,” said Suzuki.
In India, Maruti has added side and curtain airbags to the existing two airbags and most models now comply with the six-airbag requirement. This increased costs and prices of cars were raised by an average of 3–4 per cent depending on the model.
Putting purchases on hold
According to the company, customers tend to defer purchases for about 2–3 months when such price hikes happen but based on past experience, it expects them to accept the new prices after that period. The silver lining in the cloud is that the Budget has increased the tax exemption limit for the middle-class with the RBI offering more goodies in the form of rate cuts.
Suzuki has also noted that the rains have been good in India with a good harvest expected in October. “Taking all these factors into account, we expect the economic environment to improve in the second half. However, there are uncertainties such as Trump tariffs and higher tariffs on Russian oil imports in India, so while we are optimistic, we remain cautious,” said the company.
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Maruti’s leadership team in India is also of the view that high taxes have been a deterrent for its small car range. The Centre has recently announced that the number of GST slabs will now be halved to two which means a host of products in the 28 per cent category will now come into the proposed 18 per cent slot.
This will be good news for Maruti’s small cars which will now cost less though it is still a moot point if this move will still draw buyers to models like the Alto and WagonR which are now ceding ground to SUVs. To a section of experts, these models have long lost their halo and will not notch up more numbers simply because of a lower price tag. Others insist that greater affordability will make all the difference in giving small cars a fillip all over again. Eventually, it is up to the buyer to decide when the new GST regime is introduced in the coming months.
