Suzuki focuses on India; 2019 sales targeting 3.4 million

Minicars, compacts and SUVs are Suzuki's strategic segments

2015/09/10

Summary

SUZUKI NEXT 100: new mid-term management plan
  1. Emphasize India and Japan as main markets and develop Indonesia and Thailand as production base
  2. Focus on minicars, Segment-A, B, C cars and Small Utility Vehicles (SUV)
  3. Consolidate platforms and engines


・ Suzuki Motor Co., Ltd. announced in June 2015 “SUZUKI NEXT 100,” its new mid-term management plan through the fiscal year ending in March 2020 (FY 2019).

・ It anticipates that in the global automobile market, demand for small cars from minicars, Segment-A, B, C cars and SUVs will expand and that India will grow into the world’s third largest automobile market.


・ As LMC Automotive Limited predicts, Suzuki’s sales in India are expected to account for a half of its sales in the future. Suzuki has a sense of danger in solely depending on the Indian market.

・ Fiercer competition in the Japanese minicar market is compressing Suzuki’s profit.

・ In Thai and Indonesian markets, Suzuki’s third pillar after Japan and India, business is slowing down.

・ In India, Suzuki’s market share is picking up. Construction of the new plant to be operational in 2017 started and the new luxury sales channel has been launched. The OEM is implementing such measures to achieve two million unit sales in India in 2020. Success in India is a key for the mid-term management plan.


・ When announcing the mid-term management plan, the OEM also revealed that Chairman & CE0 Osamu Suzuki, who has led the automaker for about forty years, would pass over the presidency to his eldest son, Mr. Toshihiro Suzuki and that the OEM will move the mid-term plan forward through the collective leadership.

・ On August 30, 2015, Suzuki announced cancellation of the alliance with Volkswagen AG (VW). In September 2011, it demanded VW to dissolve the capital and business alliance concluded in 2009. As VW did not respond to the request, Suzuki filed the arbitration with the International Court of Arbitration of the International Chamber of Commerce in November 2011. Suzuki received an arbitration award including termination of the agreement and VW’s disposal of its 19.9% shares in Suzuki. Suzuki’s breaches of the agreement were also upheld and that the amount of damages, if any, would be addressed in the future arbitration.

Business targets in the midterm plan

FY 2014
Results
FY 2015
Plans
FY 2019
Targets
Suzuki's unit sales by region
Consolidated
net sales
JPY 3,015.5 billion JPY 3,100 billion JPY 3,700 billion
Operating
income margin
6.0% 6.1% 7.0%
R&D Expenses JPY 125.9 billion JPY 130 billion JPY 200 billion
Capital
Expenditures
JPY 194.5 billion Five-year cumulative
amount of JPY 1 trillion
(FY 2015 forecast:
JPY 180 billion)


Related Reports:
Suzuki: Radar Brake Support available on commercial mini vehicles (Apr. 2015)



Product Strategies: Consolidation of passenger car platforms and gasoline engines

Suzuki plans to launch 20 new models globally in five years

  ・ Minicar: One new model every year (five minicar models in five years)
  ・ Segment-A: Six models
  ・ Segment-B, C and SUV: Three models for each, a total of nine
  (Please refer to these remodeling information.)

 

The new minicar platform
The new minicar platform
(Photo provided by Response of IID, Inc.)

Baleno
The Baleno compact hatchback to debut in Frankfurt Motor Show in September 2015
 
・ Suzuki consolidates new platforms into three lightweight platforms of Mini, A and B.

  It promotes inter-segment use of common functional parts through modularization and use of multiple materials. Rigidity improved by 30% and weight reduced by 10 to 15%. Suzuki first installed the new Mini-platform in the new Suzuki Alto launched in December 2014 and the new A-platform in the new Solio introduced in August 2015.

 

・ Engine

  To improve efficiency in engine development, Suzuki will focus on 660 to 1,400cc engines. It aims to achieve the average thermal efficiency of 40% for gasoline engines through higher compression ratio, direct-injection turbocharger, lean burn, cooled EGR and lower friction.

 

・ Preventive safety equipments/Drive assist system

  Suzuki will pursue advanced technologies in preventive safety measures, drive assist and automatic braking systems. It plans to fulfill daily driving support needs such as automatic parking. It will accumulate technologies in areas of detection, automatic braking/steering and two-way communication in order to develop advanced driving support systems.

 

・ Infotainment system

  Suzuki will globally expand information communication/smart phone linked navigation and further utilize vehicle information services. It will promote development of information communication technology in India.

 

・ Worldwide expansion of new technologies

  Suzuki will develop highly efficient S-ene Charge and other ISG (Integrated Starter Generator) systems and infotainment systems in consideration of needs of emerging markets.

 

 In order to promote its ISG systems, Suzuki will make aggressive efforts in Japan and India. In Japan, it has developed a system called the S-ene Charge to assist the powertrain and recover braking energy by utilizing a highly efficient ISG and lithium-ion batteries. The first model equipped with the system was the WagonR, launched in August 2014. It has then been mounted on the Spacia and the Hustler. In August 2015, the fully remodeled Solio came with the S-ene Charge. Suzuki calls this ISG system “Mild Hybrid” in small vehicles and “S-ene Charge” in minicars.

 Suzuki plans to install this ISG system into the 1.3-liter diesel engine in the Ciaz medium-size sedan sold in India and launch it to the market in September 2015. It also plans to mount it to the Ertiga multi-purpose vehicle (MPV).

 

 



Regional strategies: Focusing on Japan, India and other Asian countries

Japan

 ・ Suzuki positions Japan as the base for development and production.

 ・ It aims to gain over 30% market share in the Japanese minicar market and sell over 100,000 compact cars by introducing new mini and compact models every year. In the fiscal year ended in March 31, 2015(FY 2014), the OEM accounted for 31.3% of the Japanese minicar market and sold 76,000 compact cars in Japan.

 ・ It will renovate the Kosai plant.

 ・ It aims to achieve 50% reduction in CO2 emission volume from the current level.

 

India

 ・ While continuously focusing on the growing new buyers, Suzuki will also respond to increasing replacement demands by expanding and upgrading products, sales network and production capability. In July 2015 Suzuki launched the NEXA, its first premium dealership in India.

 ・ Suzuki aims to acquire more than 45% passenger car market share. In FY 2014, it held 45.0%.

 ・ Suzuki will establish the new Gujarat plant to be operational in 2017 as its most advanced plant.

 

ASEAN

 ・ Suzuki aims to develop Indonesia and Thailand as the production base to follow Japan and India in order to serve both in and out of ASEAN countries.

 

Europe

 ・ Suzuki will upgrade its advanced technologies and product competitiveness by responding to the fuel efficiency regulations, safety technology and designing demands.

 

 



India: Aiming to expand market share and achieve two million unit sales in 2020

Maruti Suzuki's sales in India In FY 2014, Suzuki sold 1,171,000 units, up 11.1% year over year, in India, thanks to strong sales of the Celerio compact sedan and the Ciaz medium-size sedan launched in FY 2014.

 The market share resulted in 45.0%, the highest in four years. In FY 2011, the share sharply fell to 38.3% affected by the austerity measures, which made auto loans difficult to get for compact car buyers-its major customers, and by the production halt due to labor dispute. Suzuki's market share, however, has gradually recovered thereafter.

 The market share for the April-July 2015 period, reached 47.5%, the highest in ten years. Contributing factors were strong sales of new models and the number of sales outlets doubled in the last five years.

 Suzuki has set a target to increase sales in India to two million units by 2020.

 

New plant in Gujarat, India, to be operational in 2017

 In January 2015, Suzuki held a ground-breaking ceremony  at its 100% owned new facilities in Gujarat. It plans to start operations of the first assembly line with the annual production capacity of 250,000 units at this JPY 60 billion plant in mid 2017.

 This addition will expand Suzuki’s production capacity in India to 1.75 million units/year in 2017. It also plans to add 500,000 units/year to the Gujarat capacity to total 750,000 units/year in the future.

 Suzuki's existing plants in India have been operated by its joint-venture company, Maruti Suzuki India Limited. This new plant in Gujarat, however, is 100% owned by Suzuki and supplies all the products to Maruti Suzuki. Maruti Suzuki, therefore, is able to save the production cost, which will be invested in development of products and the dealership network.

 

Premium sales channel NEXA

 In July 2015, Suzuki launched the premium dealership NEXA, for medium to luxury class cars in India. Starting with about thirty outlets, it plans to expand it to one hundred by the end of FY 2015. It plans to sell models priced over INR 800,000. In August, the NEXA will introduce its first SUV, the S-Cross.

 An increasing number of customers are not satisfied with low-cost brand cars in India. The NEXA dealerships will decorate both the interior and exterior of the shops in standardized luxurious taste to win such a new customer segment.

 

NEXA S-Cross
A NEXA premium brand dealer
(Source: Maruti Suzuki India Ltd.)
The S-Cross SUV
(Source: Maruti Suzuki India Ltd.)

 

 



Minicar market in Japan: Severe market share competition compress profits

 

日本の軽自動車市場のシェア 2015年の自動車販売台数


 In 2014 calendar year, the mini-vehicle market in Japan reached 2.27 million units, accounting for 40% of the whole Japanese automobile market. Suzuki won the first position in the CY 2014 mini-vehicle market share ranking for the first time in seven years, by selling 709,000 units, up 13.9% y/y. 104,000 unit sales of the Hustler, the first mini crossover SUV largely contributed to the result.

 Competition for first place between Suzuki and Daihatsu Motor Co., Ltd. is increasingly fierce and both Honda Motor Co., Ltd. and Nissan Motor Co., Ltd. are expanding market shares for the past few years. The minicar market has thus become increasingly competitive.

 Sales costs in Japan, therefore, expanded and Suzuki’s FY 2014 operating profit from the business in Japan plunged into 32.6% y/y drop to JPY 90.7 billion. As the OEM’s business in Japan accounts for over 50% of its whole business, this became a large factor in the companywide profit decline.

 In the January to July 2015 period, the minicar sales in the entire Japanese market took a downward turn with a 15.7% y/y decline to 1.19 million units as the light vehicle tax hike in April 2015 had a negative impact. Suzuki’s sales dropped by 16.3% y/y and its market share was 29.4%, the second in the ranking.

 

 



Indonesia and Thailand as next market pillar: Both suffering from sales decline

 

Suzuki in Indonesia Suzuki in Thailand

 

 Sales in Indonesian and Thai markets, which Suzuki positions as the third pillar of its business after Japan and India, were both slow in the first half of 2015. Inflation and rising interest rates in Indonesia and slow business recovery in Thailand negatively affected. In the first half of CY 2015, Suzuki’s sales in Indonesia fell by 26.5% y/y to 64,000 units and those in Thailand decreased by 10.5% y/y to 10,000 units.

 Local production in both countries, however, increased in the period. The production volume in Indonesia was 74,000 units, up 6.6% y/y. In May 29, 2015, the OEM announced that its automobile assembly plant in Cikarang completed and commenced assembling the Ertiga, which had previously been assembled at the Tambun plant. Suzuki’s production capacity in Indonesia has therefore been increased to 248,000 units from 142,000 units.

 The production volume in Thailand in the first half of CY 2015 almost tripled year on year to 26,000 units, thanks to production and export of the Celerio for Europe that Suzuki commenced in Thailand. Export from Thailand started in September 2014.

 

 



FY 2015 business forecasts: Aiming for record-high operating profit of JPY 190 billion

Suzuki's sales and profit According to Suzuki’s FY 2014 consolidated financial summary, net sales in Japan decreased by 3.4% y/y, net sales outside Japan increased by 6.4% y/y and the consolidated net sales increased by 2.6% y/y to JPY 3.02 trillion. Operating income declined to JPY 179.4 billion by 4.4% from the record high of FY 2013. The lower income from the business in Japan and the cost for recalls were negative causes.

 Achievement of JPY 3.02 trillion net sales and 6.4% operating income margin fulfilled Suzuki’s mid-term business objectives through FY 2014, that is, JPY 3 trillion net sales and 6% operating income margin.

 According to Suzuki’s FY 2015 consolidated business forecasts, it will decrease volume sales in Japan but increase them in Asia, mainly in India. Suzuki aims to achieve JPY 3.1 trillion net sales, up 2.8% y/y, and the record-high operating income of JPY 190 billion, up 5.9% y/y.

Statistics available at the end of the report)


 



Sales Forecast by LMC Automotive: Suzuki’s sales will be 2.8 million units in 2018

(LMC Automotive, Quarter 2, 2015)

Suzuki's light vehicle sales forecast According to LMC Automotive’s latest forecast (Q2 2015), Suzuki’s light vehicles sales in major 51 countries are expected to be 2.61 million units in 2015, down by 4.9 % from 2014.

 Suzuki’s Japanese sales in 2015 will significantly drop by 21.3% to 619,373 units, because the mini-vehicle tax is hiked in April 2015.

 In India, its largest market, Suzuki will sell 1.19 million units in 2015, up by 3.1%. Maruti-Suzuki is certainly facing the heat in India, and it is adopting a two-channel marketing strategy. A newly developed retail network under the ‘Nexa’ badge is being rolled out to focus on slightly Premium products, such as the Ciaz and upcoming SX4 S-Cross, while its entry-level products will be sold under the existing infrastructure. The move is Maruti-Suzuki’s attempt to be viewed as a more Premium brand. There is no doubt that the strategy is designed to allow the group to better compete against the likes of Honda and Toyota. Defending market share in India is crucial for Suzuki since it will continue to account for more than 60% of its regional sales over the long term.


 As for the medium- and long-term outlook, Suzuki’s light vehicle sales will be 2.84 million units in 2018, up by 3.3 % from 2014. Given the continued expansion of the Indian market and Maruti-Suzuki’s strong position, the sales will be expected to reach 1.45 million units in 2018, up by 26.1% from 2014. While Suzuki’s Japanese sales will decrease to 501,120 units, down by 36.4% from 2014.

Suzuki light vehicle production forecast by country

2012 2013 2014 2015 2016 2017 2018
Total 2,551,663 2,582,147 2,747,309 2,611,374 2,653,972 2,775,144 2,838,423
India 1,064,652 1,064,064 1,150,280 1,185,516 1,213,160 1,322,464 1,450,265
Japan 673,316 701,315 787,358 619,373 581,479 577,828 501,120
China 254,688 233,535 266,348 251,551 256,666 225,810 214,250
Indonesia 126,577 163,856 154,923 127,566 137,495 151,984 164,002
Pakistan 95,763 76,819 77,817 104,805 102,020 106,254 108,585
Germany 30,860 26,910 27,872 41,437 50,339 50,343 48,303
Italy 14,687 13,862 15,797 21,242 30,160 32,275 33,155
Thailand 24,685 45,292 20,183 19,849 24,341 31,365 31,792
Australia 24,057 22,028 17,422 23,461 26,862 28,377 29,066
UK 24,893 33,088 37,395 31,956 30,502 28,576 27,833
France 16,350 15,877 15,845 17,298 20,201 22,603 23,975
Chile 17,389 21,943 21,723 18,407 17,934 18,398 18,996
Mexico 10,733 11,250 12,510 15,116 16,391 18,271 17,743
Russia 32,684 27,724 19,931 9,851 12,149 13,969 16,327
Netherlands 12,522 8,636 8,623 9,706 9,273 11,137 11,532
Poland 5,994 5,994 6,129 7,247 9,010 9,780 10,712
South Africa 4,724 4,865 6,402 7,050 9,416 11,004 10,108
Philippines 4,501 5,146 6,881 8,357 8,274 8,970 9,587
Peru 4,737 9,072 8,746 7,980 8,367 8,567 9,118
Hungary 3,316 3,940 4,742 5,008 5,857 7,292 8,224
Switzerland 7,662 8,323 8,487 6,978 7,383 7,939 7,935
Colombia 1,477 4,777 7,563 6,155 6,267 6,553 6,846
Taiwan 3,939 5,570 6,914 6,723 6,750 6,810 6,805
Brazil 7,120 6,299 6,044 5,590 6,138 6,168 6,563
Belgium 5,100 5,244 6,079 5,750 6,116 6,480 6,530
Spain 3,710 3,104 2,407 3,713 5,646 6,172 6,153
Austria 6,079 5,624 4,619 4,763 5,511 5,888 5,953
Denmark 6,560 5,557 6,158 5,283 4,765 5,285 5,234
Uruguay 3,290 3,282 3,342 6,888 4,967 5,004 5,129
Greece 2,280 2,214 3,347 2,745 3,098 3,758 4,340
Iran 2,643 753 453 2,625 3,023 3,737 4,333
Vietnam 3,457 4,818 3,438 3,841 3,812 4,067 4,239
Sweden 2,694 2,566 2,440 2,606 2,984 3,237 3,189
Norway 2,042 2,300 2,820 2,993 3,084 3,132 3,119
Malaysia 8,087 4,962 4,262 2,803 2,610 2,580 2,729
Turkey 1,781 1,626 960 1,416 2,078 2,128 2,406
Slovakia 2,431 2,772 2,611 1,479 1,780 2,090 2,191
Czech Republic 2,340 2,285 2,350 1,603 1,889 2,141 2,181
Kazakhstan 569 846 352 628 1,021 993 1,401
Ukraine 1,686 1,765 1,344 697 968 983 1,319
Ireland 634 579 653 639 984 1,148 1,272
Romania 1,638 1,226 1,223 582 906 1,102 1,261
Luxembourg 589 571 529 499 539 557 584
Finland 814 623 646 475 381 464 504
Slovenia 204 238 405 375 294 299 309
Portugal 168 76 25 157 270 303 308
Estonia 203 166 329 195 268 247 242
Latvia 192 16 181 153 197 220 235
Lithuania 81 140 155 94 141 154 169
Bulgaria 185 102 123 94 111 141 149
Argentina 20 1 123 56 95 97 102
Venezuela 4 1 0 0 0 0 0
Canada 5,458 3,071 0 0 0 0 0
USA 19,398 5,434 0 0 0 0 0
Source: LMC Automotive "Global Automotive Sales Forecast (Quarter 2, 2015)"
(Note) 1. Data indicates figures of only small-size vehicles, including passenger cars and light commercial vehicles with gross vehicle weight of under 6 tons.
2. All rights reserved. Reproduction of any data will require permission of LMC Automotive.
3. For more information or inquiries of forecast data, please contact LMC Automotive.

 

 



Statistics

Suzuki Motor Co., Ltd. Consolidated Financial Summary

(in 100 millions of JPY)
FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015
forecasts
Apr.-Jun.
FY 2014
Apr.-Jun.
FY 2015
Total net sales 26,082 25,122 25,783 29,383 30,155 31,000 7,104 7,729
Net sales Japan 9,375 9,868 10,409 11,327 10,946 9,500 2,560 2,473
Net sales overseas 16,708 15,254 15,374 18,056 19,209 21,500 4,544 5,256
Operating income 1,069 1,193 1,446 1,877 1,794 1,900 509 552
Ordinary income 1,225 1,306 1,556 1,978 1,943 2,000 593 623
Net income 452 539 804 1,075 969 1,100 375 317
Capital expenditure 1,303 1,267 1,693 2,136 1,945 1,800 426 337
Depreciation expenses 1,384 1,031 937 1,172 1,344 1,600 309 376
R&D expenses 1,041 1,098 1,193 1,271 1,259 1,300 280 316
U.S. Dollar (JPY) 86 79 83 100 110 115 102 121
Euro (JPY) 113 109 107 134 139 125 140 134
Indian Rupee (JPY) n.a. 1.68 1.54 1.68 1.81 1.85 1.72 1.93

Source: Reference materials on the FY 2014 Financial Results issued by Suzuki Motor Co., Ltd.
Note: FY 2015 forecasts were based on the news release in May 2015.

 

New car sales volume

(in thousands of units)
FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015
forecasts
Apr.-Jun.
FY 2014
Apr.-Jun.
FY 2015
Japan 588 596 672 728 756 645 184 152
Europe 244 223 197 205 195 205 49 50
North America 33 32 30 - - - -  
Asia India 1,133 1,006 1,051 1,054 1,171 1,288 271 306
China 290 296 253 232 253 n.a. 67 46
Indonesia 75 94 139 165 148 n.a. 40 32
Thailand 6 10 33 40 20 n.a. 6 5
Others 120 144 112 105 129 n.a. 30 48
Total 1,625 1,550 1,588 1,596 1,721 1,931 413 437
Others 153 160 174 181 196 198 45 48
Grand total 2,643 2,560 2,661 2,709 2,867 2,979 691 688
Source: Reference materials on the FY 2014 Financial Results issued by Suzuki Motor Co., Ltd.
Note 1. The above statistics are of the Suzuki brand vehicles, including a part of those produced under license. FY 2015 forecasts were based on the news release in May 2015.
2. FY 2014 and April-June FY 2015 overseas sales statistics include some estimates.

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