Home >Companies >Suzuki worried about impact of Toyota’s Daihatsu acquisition

Maruti Suzuki India Ltd, the Indian unit of Japanese automaker Suzuki Motor Corp., will have to shoulder greater responsibilities in terms of generating higher profits, volumes and quality products as the parent firm fears that Toyota Motor Corp.’s decision to buy out Suzuki rival Daihatsu Motor Co. Ltd will be a threat to the company in India as well as globally.

Maruti will need to build and sell cars that exceed buyers’ expectations and enhance its sales and service network, said Suzuki president Toshihiro Suzuki. He said that the importance of the Indian market, in terms of generating volumes and profits, will only grow as the Japanese car maker expands its footprint in Asia and Europe. Edited excerpts from a Mint interview and Suzuki’s media roundtable.

On a Toyota-Suzuki alliance

We have already declined formally that there is no discussion for an agreement with Toyota. Whatever technology is required because of the changing environment and regulation, SMC (Suzuki Motor Corp.) will like to make an effort to develop the technology on its own.

SMC and Maruti Suzuki India Ltd will get united as one body and work on it. Having said that, be it technology or safety, it is difficult for one company to cover all the areas by itself.

Therefore, there can be a joint working, no alliance.

There is a high possibility of working together with a raw material supplier or a component manufacturer, but there is no discussion for an alliance.

On Maruti Suzuki’s growing importance

The position of Maruti Suzuki is becoming more and more important in India as well as under Suzuki, globally. Here, we are on track to achieve 2.2 million unit sales by 2020.

Maruti is making Baleno and exporting it to Japan. It’s in line with the government’s Make in India programme. Now, the shareholders have approved the Gujarat plant. The task ahead is to set up the unit. We started from 22,000 volume in India and we have reached one million. We could do this because of SMC’s specializations. I won’t say that the Indian market has matured, but it is evolving.

On transfer of technology to India amid stricter emission, safety and fuel efficiency regulations

In order to meet future regulatory requirements, we are currently working on hybrids, fuel cells and electric vehicles. We would like to make efforts on our own to develop them. Given the price sensitivity of the small car market, Suzuki and Maruti will be working on enhancing the fuel efficiency of gasoline and diesel engines.

On potential competition from Daihatsu, if it becomes a subsidiary of Toyota

This will be a threat for SMC not only in India but also for other markets.

Though we don’t have any specific measure to counter it, developing products keeping the customers in mind and strengthening our sales and service further will be one of the ways we will set ourselves apart. It’s also part of the Next 100—the company’s new mid-term plan. It is not only the Toyota alliance, but the entry of other international (car) manufacturers in India which is making the competition tougher.

On over-dependence on a single market such as India

In order to reduce dependence on the Indian market, SMC has to expand its presence in Asia and Europe and at the same time increase profitability of the India operations.

Maruti will have to make efforts for the same. It’s a competition between the two sides. The competition has become tougher in India; so, in order to win over the competition, we have to offer products that are superior to expectations.

On the car market in Japan

Japan has increased tax on compact cars by 3,600 yen. This has shocked buyers in the compact car segment—customers are very price sensitive, therefore an increase in tax has impacted the segment. The consumption tax is to increase in April. Before it goes up, there will be a last-minute rush.

On Nexa, the premium channel which sells the S-Cross and Baleno models

So far, it has done well. However, we cannot call it successful just as yet. We are not looking to launch the second phase of replicating it in other markets, as these markets have some issues which need to be sorted out before we do it.

On the R&D centre in India

When an engineer joins SMC, it takes 10 years for him to start delivering as a technical person.

Secondly, SMC established its R&D centre about 60 years ago. So, Maruti will take at least 20-30 years to come to that level.

The Indian R&D is expected to develop suitable products for the Indian market; they will be sharing more and more responsibility with SMC, going forward.

SMC is making significant shifts in new technology; Maruti will be using them in its products. As a result, there can be some changes in the royalty outgo. However, I won’t be able to share more details.

On a Maruti 800 replacement

With the safety and emission norms becoming stiffer, it is difficult to launch a product in that price segment.

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