New Delhi: Japan’s Suzuki Motor Corp. will shift its entire export operations for the Middle East, Africa, Latin America and South-East Asia to India by the end of the next fiscal year, said R.C. Bhargava, chairman of Maruti Suzuki India Ltd.
“Suzuki’s overseas marketing division functions on a territorial basis. All of them will shift to India with export headquarters being set up at our office in Vasant Kunj,” Bhargava said in a phone interview on Monday. “People from Suzuki’s overseas operations will be based out of here.”
The entire process should be completed by the end of 2014-15 and the export headquarters will report to Maruti Suzuki, he said. Suzuki Motor owns 56% of Maruti Suzuki.
Increasing salaries and an ageing population is making Japan lose its cost-competitiveness, Bhargava said.
A rise in exports to emerging markets is providing a degree of comfort to Indian auto makers at a time when demand in the bigger markets such as Europe and North America has slowed.
The Renault-Nissan alliance, Hyundai Motor Co. and Ford Motor Co. have sharpened their focus on manufacturing and exports from India to offset rising input costs in their domestic markets. The rupee’s depreciation against the dollar has also boosted exports from India.
For any company, its cost base becomes very important when it comes to exploring overseas markets, said Abdul Majeed, automotive practice leader at consulting firm PricewaterhouseCoopers.
“In Suzuki’s case, India makes more sense as they are fairly big in size here and know that if they have managed to understand the psyche of Indian customers, they could be successful in other markets as well,” Majeed said. “Moreover, India is strategically located and its proximity to ports makes it suited for exports.”
Bhargava said the export headquarters will focus on laying foundations for building sales networks in preparation for future market growth in the Middle East, Africa, Latin America and in India’s neighbouring countries.
“The main risk comes in the form of currency movements when you are looking to develop new markets. It exposes you to a lot of volatility. We need to study this very carefully,” Bhargava said.
Maruti, which exports 10% of its production, aims to increase it to 15% in the near-term and raise it further to 20-25% in the medium to long-term.
Suzuki, which has sold cars made in Japan in Latin America, plans to introduce global models from India in that market.
India has been driving Suzuki’s growth, with Maruti contributing 40% of the parent’s net profit. In contrast, Suzuki has pulled out of the US market and its sales have suffered in Europe and Japan.
As the firm gears up to increase its presence substantially in export markets, it has created two new departments in Maruti’s international marketing team. While one department will look after markets such as Latin America, South-East Asia, Oceania and Europe, the second will focus on the Middle East and North America. Mint reported this on 17 May.
With demand for Suzuki’s vehicles shrinking in other markets, it makes sense for them to look for future growth avenues, said an automobile analyst, who declined to be named as he is not authorized to speak to reporters.
“Having said that, one also needs to understand that Suzuki is not a big auto company globally and it is known for its bikes. In the car segment, its pedigree in the passenger vehicle segment remains small cars,” the analyst said. “So, they need to expand in the markets, which are raw and where customers would look to buy their vehicles.”