Maruti Suzuki India Ltd, the country’s largest carmaker, will face challenges in defending its control of half of the domestic market over the next decade because of various industry disruptions and intensifying competition, said a top executive at its parent Suzuki Motor Corp.
In addition to subdued sales amid an economic slowdown, the entry of Hyundai Motor India Ltd, the second-largest carmaker, in the compact sport-utility vehicle segment with the Venue model and diminishing consumer preference for diesel engine products, has hit Maruti’s sales and financials in the past year.
Going forward, new emission, safety and fuel efficiency related regulations will make cars more expensive, which is likely to have an adverse impact on vehicle sales in India.
“It’s a challenge. Globally, one company has never been able to get 50% share in one country. The Indian market is very special to us and we will try to keep the 50% share, but there are varied challenges. General Motors in the US has around 16% market share and same is the case with Volkswagen in Europe. But I will try to keep the 50% market share (in India)," Toshihiro Suzuki, president, Suzuki told reporters on the sidelines of the Tokyo Motor Show.
Osamu Suzuki, chairman of Suzuki, had in July last year announced the company’s aim to hold on to its 50% market share in India and sell five million cars by 2030, assuming the total size of the Indian passenger vehicle market at around 10 million vehicles annually.
Maruti Suzuki has witnessed a sharp fall in wholesales, or factory dispatches, this fiscal year through March. This led to a decline in its market share to 49.76% in the fiscal first half from 52.1% a year earlier.
Wholesale dispatches fell 27% year-on-year to 663,522 units in the April to September period. Consequently, the company reduced production for eight consecutive months until September.
Maruti’s financial well-being is essential for Suzuki, since the Indian unit contributes more than 50% of the parent’s revenue and net profit.
Recently, the Hamamatsu-based company cut its net sales forecast by 10.3% to 3,500 billion yen and net profit guidance by 30% to 140 billion yen, for the current fiscal year, on account of production loss in Japan and a sharp slowdown in sales in its single-biggest market of India.
Suzuki said the Indian market is posing tough conditions currently but is expected to recover shortly. He, however, sounded apprehensive on the possibility of adoption of electric vehicles in India in the near future.
“For electrification of vehicles, conditions in Indian market are tough because electric power supply is not in a good condition in India," he said, referring to insufficient and erratic power supply across the country. “Hybrid is a good solution for the Indian market."
Wholesale dispatches of passenger vehicles slumped 24% year-on-year in September, the eleventh straight month of such decline, reflecting the slowdown in the wider economy.
The writer is in Tokyo at the invitation of Toyota Motor Corp.