New Delhi: Suzuki Motor Corp is to increase production in India, building its next world strategic model there, its chief executive said, underlining the importance of the fast-growing market to the Japanese company.
Maruti Suzuki India Ltd, in which Suzuki owns 54.2 per cent, will make the A-segment hatchback at its Manesar plant near New Delhi from October 2008, Osamu Suzuki said on Tuesday.
The company aims to make 150,000 of the cars, which will be exported to Europe first from December 2008, he said at a news conference in the Indian capital. The venture has exported little from India up to now.
"Suzuki Motor Corp attaches great importance to India," the chairman said, adding that designers from Maruti Suzuki's R&D unit have been involved in the car from the initial stages.
The car, part of a previously announced line-up of new models, will have a 1-litre petrol engine that meets European standards, and Suzuki would consider making a version with a small diesel engine from its powertrain unit in India, which makes a 1.3-litre diesel engine, he said.
Suzuki is beefing up its vehicle line-up and dealer network in India in a bid to retain its market share of about 50 percent. Suzuki Motor will invest 200 billion yen ($1.79 billion) in its plants in India, Suzuki reiterated, as it steps up annual capacity to 960,000 cars by March 2009.
Maruti Suzuki for the first time sold more cars in India than its parent in Japan during the first half of the fiscal year, with models such as the Alto and Swift hatchback attracting buyers.
Maruti Suzuki, founded by Suzuki and the Indian government in 1982, has led the dominant small car market with fuel-efficient models, and is now moving to more premium vehicles, including the SX4 sedan and the Grand Vitara sport utility.
Maruti, which will have the capacity to make 1 million cars by 2010/11, is investing $1.75 billion in research and development. But competition is heating up with third-ranked Tata Motors Ltd, as well as global rivals including Hyundai Motor Co, Toyota Motor Corp, Honda Motor Co and Volkswagen all hoping to increase sales.
Like Suzuki, these firms are eyeing India's growing base of wealthy consumers, as well as its advantages in manufacturing. Hyundai, which aims to make India a hub for small cars, recently launched the i10 first in India, where it is built. "They have demonstrated that India is a viable small car hub for cost efficiencies and economies of scale, as well as market size," said Ashutosh Goel, an analyst at Edelweiss Securities.
Suzuki will also face a greater threat at the lower end from a $2,500 car that Tata Motors is scheduled to launch in 2008, and a $3,000 car that Renault aims to build with motorbike maker Bajaj Auto Ltd <BJAT.BO>. "Suzuki has a strong pipeline and is likely to have a dominant share of the market for the next four to five years. But it will be difficult to hold on to this big a share," Goel said.
Shares in Maruti, which has a market worth of $7.85 billion, ended up 3.2 percent at 1,078.50 rupees in a Mumbai market that hit a new high. They trade at 16.3 times forecast earnings, compared to 16.7 times for top vehicle maker Tata Motors.