Caught by surprise at the robust growth in car demand in India,
Osamu Suzuki on Tuesday promised fresh investment of Rs1,925 crore in capacity addition so that subsidiary company Maruti Suzuki India can make 1.75 million vehicles annually by 2013. That translates into 45% capacity addition in three years, by when India should comfortably surpass home production in Japan to become Suzuki’s largest manufacturing base. Suzuki Motor Corporation plans to do this by adding a third line at Manesar and also simultaneously adopting ‘scrap and build’ method at Gurgaon. Suzuki talks about his India and global plans in an interview with Sindhu DNA. Excerpts:
On the Volkswagen deal and the strategy to operate two brands, VW and Suzuki
Volkswagen bought a 19.9% stake in Suzuki for a certain amount. Half of the proceeds will be used by us to buy shares in VW. Till date, we have acquired 4 million VW shares and plan to take up our stake in that company to 2% (not larger because the equity base of that company is very large). The remaining 50% money will be used by us to buy equipment.
On joint product development between VW and Suzuki
Let’s be very clear that there will be no selling of each other’s vehicles. Before we get to joint product development, common components have to be developed. That would be the starting point. No, a concrete plan isn’t ready yet on this. It is wise for Suzuki and VW to jointly develop components for vehicles which sell large volumes. VW is selling greater volumes in China so Suzuki can use components from China through VW; this will bring down costs. But whether Suzuki makes common use of VW in China of VW uses Suzuki to source components from India ... there has been no discussion between the two partners on this as of now.
On whether Maruti will look to alter shareholding in component companies in India under the joint sourcing plan with VW
We are not thinking of either increasing or decreasing stakes.
On the contours of joint product development with VW
In case we do joint product development, then these products would be sold globally. Of course, vehicles we sell together in US, Europe, Asia, Indonesia, Thailand and Brazil will of course be different products.
On hiking stake in Maruti Suzuki
As of now we have a 54% equity and whether we will increase this or not will depend on investments in equipment. It could be increased or even decreased. We have not taken a decision as of now.
On the fate of Maruti-Nissan contract manufacturing alliance after VW became a shareholder
Globally, Suzuki is a contract manufacturer for four companies - Nissan, Mazda, General Motors and Fiat. But from India, we do this only for Nissan. In all these instances, Suzuki has a very good relationship with the companies that source vehicles from it. But for the Maruti-Nissan alliance, it is difficult for me to comment on what will happen in future. They (Nissan) should be willing to buy and we should be willing to make products for them.
On whether VW will become fifth company to source vehicles globally from Suzuki
Not as of now, but if in future VW wants to buy vehicles from us, we will decide the terms and conditions (for such a contract).
On whether capacity expansion is being done late in India
We can’t say that the capacity expansion announcement has come late or that demand has grown too early.
On whether Suzuki is working to develop new diesel engines
So far as the Fiat 1.3 litre engine goes, we have a contract. We continue to manufacture this diesel engine under license from Fiat, but depending on requirements in India, we will take a call (on whether to make new, different diesel engines).
On increasing competition in India, the arrival of the Tata Nano and Maruti’s future strategy
We have 12 models as of now and need to increase this number. We can see these either in terms of cc or classify them as hatchbacks, notchbacks etc. Our effort is to manufacture models which are saleable in India. We are not thinking in terms of cc. One more thing: we have no plans as of now to make a product smaller than 800 cc which is already available in India.
On how is Maruti contributing to Suzuki’s global sales and turnover
As of March 2010, Suzuki’s consolidated sales were about 2.5 trillion yen whereas Maruti’s topline was 600 billion yen. So Maruti’s turnover constituted about 25% of Suzuki’s turnover. In terms of sales, Suzuki sold 2.3 million vehicles globally last year of which Maruti’s contribution was a million units.
And Maruti’s weightage in Suzuki’s portfolio will only increase in future because of exchange rate fluctuations and a stable rupee-yen relationship. But Suzuki is also building a Rs 1,925 crore plant in Thailand which comes on stream in 2012 so Maruti’s weightage may change yet.
On his own forecast for India’s car market size in next few years
If Suzuki were the lone car maker in India, we could have predicted growth. As of now, we see annual growth rate of 10% but growth is quite rapid for India so very difficult for us to give an estimate.
On product strategy globally and for India in the medium term
Right now we are focused on 1000-1300 cc space. But if there is demand for bigger vehicles in India going forward, then we will make them.
On his succession plan at SMC now that he has turned 80
I am healthy yet so will continue (to head the operations).
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