Suzuki: Alliance with Toyota, recall, and electrification
Sales volume in Q1 FY2019-20 falls below previous year due to stagnant sales in India and Japan
Suzuki’s global sales volume in FY 2018-19 (April 2018 to March 2019) grew 3.2% year-over-year (y/y) to 3.327 million units, hitting a new record high. Of this, 1.754 million units were sold in India, accounting for 52.7% of Suzuki’s total sales volume. Its consolidated business results showed increased net sales and decreased operating income. Operating income fell 13.3% y/y due to the impact of the depreciation of currencies of emerging countries and the increase in various expenses, and net income dropped 17.1% y/y as a result of registering an extraordinary loss of JPY 81.3 billion for conducting a recall campaign resulting from improper vehicle inspections.
Suzuki’s global sales volume for the first quarter of FY 2019-20 fell 14.4% y/y to 738,000 units. Vehicle sales dropped in Japan due to reduced output accompanying the reconstruction of its inspection system, while in India, the automaker’s main market, sales volume decreased owing to financial institutions’ credit squeeze and reduced demand caused by an economic recession. When reporting the first quarter results, Suzuki maintained its full year outlook disclosed at the beginning of the fiscal year, which assumed that net sales and operating income would be flat, in line with the previous year. However, with a view of discouraging prospects, the company suggested that it will announce a new outlook in the near future.
Suzuki and Toyota have been steadily strengthening their partnership since they announced that they would explore a business partnership in October 2016. Toyota will supply its hybrid systems to Suzuki and collaborate in the introduction of electric vehicles (EVs) into the Indian market. At the same time, Suzuki will supply its compact vehicles to Toyota. In August 2019, the two companies announced an agreement to enter into a capital alliance. Toyota will own 5% of the total number of shares issued by Suzuki, and Suzuki will acquire 0.2% of shares in Toyota. They will enhance their cooperation to develop next-generation technologies including autonomous driving technology based on a long-term partnership.
Among global production plants, Suzuki terminated a joint venture agreement with Changan Automobile in China in September 2018. Nevertheless, Suzuki will continue to license production and sales of Suzuki vehicles to Changan Suzuki, which became a wholly owned subsidiary of Changan Automobile. In Indonesia, which Suzuki positions as the third hub of production and export after Japan and India, the automaker aims to increase production and exports of the new Ertiga and Carry.
In August 2018, Suzuki disclosed that it found misconduct in its final vehicle inspections. After the company conducted detailed investigations including an examination by outside investigators, other irregularities were found. As a result, Suzuki submitted a report on April 2019 for a recall of 2.02 million vehicles of 29 models including rebadged models supplied to other automakers.
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