Suzuki’s Indian operations: Production capacity to expand to 2.25 million vehicles

Sales network to expand to 3,000 dealers, target for annual sales of 2 million vehicles

2017/07/27

Summary

The
Baleno
The Baleno, Indian-manufactured global strategic vehicle
(Photo: Maruti Suzuki)

  Suzuki's global vehicle sales in the fiscal year that ended in March 2017 saw a year-over-year (y/y) increase of 2.0% to 2.918 million vehicles. In India, the OEM's largest market, sales grew a considerable 10.7% to 1.445 million vehicles, which comprises nearly half of the automaker's total vehicle sales.

  Suzuki plans to develop India as a global strategic base. Global strategic vehicles will be manufactured in the country to increase supply capabilities for the domestic market and expand exports. A new plant in Gujarat came on stream in February 2017. The first line has an annual production capacity of 250,000 vehicles, but the OEM plans to add second and third production lines to raise the plant's production capacity to 750,000 vehicles. Combined with the two existing plants in Haryana (annual production capacity of 1.5 million vehicles), Suzuki will achieve an annual production capacity of 2.25 million vehicles in India.

  The Baleno compact hatchback is manufactured at the new plant in Gujarat. The Baleno was first manufactured at the Manesar plant in Haryana, and was released through the NEXA premium sales network in October 2015. The Baleno has become the best-selling premium hatchback in India, with over 10,000 vehicles sold monthly. Additionally, the Baleno is exported to more than 100 countries and regions as an Indian-manufactured global strategic vehicle. Exports to Japan began at the start of 2016, making it the first Maruti Suzuki vehicle to be exported to Suzuki's home country as part of the Indian government's "Make in India" initiative.

  At the end of June 2017, Suzuki announced its aim to achieve annual sales of 2 million vehicles in India in FY 2020. The OEM also plans to expand the number of dealerships to 3,000 and expand its service facilities to 5,000 locations (as of the end of March 2017, there are 2,312 dealerships and roughly 3,200 service facilities). Suzuki is also expanding its NEXA premium sales network that was established in July 2015, and is adding to its lineup of vehicles targeted at the rapidly growing middle-class. Furthermore, the OEM entered new segments by releasing new models such as the Vitara Brezza compact SUV and the Super Carry light commercial vehicle (LCV). Existing mass-market models will also be updated in order to meet Indian emissions restrictions and safety standards.

  In April 2017, Suzuki announced it would establish a new lithium-ion battery pack company in India with Toshiba and Denso. The Bharat Stage 6 standard (equivalent to Euro 6 emissions standards) is scheduled for implementation in India in 2020. Suzuki already has released diesel HV models such as the Ciaz and Ertiga in India, but it will further promote the electrification of locally manufactured models.

Related reports:
India's automobile market: Introducing NCAP and Euro 6 compliant emission regulations (Apr. 2017)
Toyota and Suzuki: Starting discussions for a business alliance (Nov. 2016)
India Market Analysis: Record sales in fiscal year 2015-16, strong trend continues in current year (Aug. 2016)
India (Part 2): Suzuki builds new plant and sets up premium car sales channel (Jan. 2016)
India (Part 1): Auto industry envisions quadrupling in next ten years (Jan. 2016)



The Indian market: Accounting for half of Suzuki’s global sales

  In Suzuki's settlement of accounts for the fiscal year that ended in March 2017 (FY 2016), consolidated sales fell 0.3% y/y to JPY 3.1695 trillion, with operating profit increasing by 36.5% to JPY 266.7 billion. Sales for the automobile business increased by 0.6% to JPY 2.8956 trillion, and operating profit increased by 32.4% to JPY 255.1 billion. Automobile vehicle sales increased from the previous term by 2.0% to 2.918 million vehicles, with overseas sales increasing by 2.2% to 2.279 million vehicles, and domestic sales increasing by 1.4% to 639,000 vehicles. In India, Suzuki's largest market, vehicle sales grew by 10.7% to 1.445 million vehicles.

  Suzuki's consolidated earnings forecast for FY 2017 projects a sales increase of 7.3% y/y to JPY 3.4 trillion, and operating profit to decrease by 10.0% to JPY 240 billion. Although the automaker expects sales to continue to increase in overseas markets, it foresees an increase in earnings and decrease in profits due to research and development expenses and depreciation costs. Global sales of Suzuki automobiles are expected to grow 5.2% y/y to 3.071 million vehicles, the first time for the OEM to exceed 3 million units. Suzuki expects growth of 8% in the Indian market, which comprises nearly 50% of its global vehicle sales.

Suzuki Motor Co., Ltd. Consolidated Financial Summary

(JPY 100 millions)

FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017
forecasts
Total net sales 26,082 25,122 25,783 29,383 30,155 31,807 31,695 34,000
Net sales Japan 9,375 9,868 10,409 11,327 10,946 10,479 10,375 10,500
Net sales overseas 16,708 15,254 15,374 18,056 19,209 21,328 21,320 23,500
Operating income 1,069 1,193 1,446 1,877 1,794 1,953 2,667 2,400
Ordinary income 1,225 1,306 1,556 1,978 1,943 2,091 2,867 2,550
Net income 452 539 804 1,075 969 1167 1600 1,450
Capital expenditure 1,303 1,267 1,693 2,136 1,945 1,715 1,988 2,200
Depreciation expenses 1,384 1,031 937 1,172 1,344 1,683 1,634 1,800
R&D expenses 1,041 1,098 1,193 1,271 1,259 1,310 1,315 1,500
U.S. Dollar (JPY) 86 79 83 100 110 120 108 110
Euro (JPY) 113 109 107 134 139 133 119 115
Indian Rupee (JPY) n.a. 1.68 1.54 1.68 1.81 1.85 1.63 1.65
Source: Reference materials on the FY 2016 Financial Results issued by Suzuki Motor Co., Ltd.

Suzuki's new vehicle sales by region

(1,000 units)

FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017
(Plan)
Japan 588 596 672 728 756 630 639 645
Europe 244 223 197 205 195 207 245 267
North America 33 32 30 - - -  -  -
Asia India 1,133 1,006 1,051 1,054 1,171 1,305 1,445 +8%
China 290 296 253 232 253 186 148 n.a.
Indonesia 75 94 139 165 148 120 92 n.a.
Thailand 6 10 33 40 20 21 23 n.a.
Others 120 144 112 105 129 209 162 n.a.
Sub-total 1,625 1,550 1,588 1,596 1,721 1,842 1,870 1,983
Others 153 160 174 181 196 183 164 176
Total 2,643 2,560 2,661 2,709 2,867 2,861 2,918 3,071
Source: Reference materials on the FY 2016 Financial Results issued by Suzuki Motor Co., Ltd.


New Gujarat plant comes on stream, production capacity in India to expand to 2.25 million vehicles

  Suzuki's new plant in Hansalpur, Gujarat (western India) came on stream in February 2017 and is operated by Suzuki's wholly owned production subsidiary, Suzuki Motor Gujarat Private Limited (SMG, Ahmedabad, Gujarat). The first production line has an annual capacity of 250,000 vehicles, and manufactures the Baleno compact hatchback. The model is sold through the NEXA premium sales network managed by Maruti Suzuki, Suzuki's Indian subsidiary. Roughly JPY 60 billion was invested in the first production line.

  The OEM plans to add a second line and construct an engine and transmission plant. It is aiming for these new facilities to come on stream at the beginning of 2019. Roughly JPY 100 billion will be invested in the project. Additionally, a third line will be added in the early 2020s, increasing the Gujarat plant's production capacity to 750,000 vehicles.

  Suzuki also plans to attract parts manufacturers to the Gujarat plant. Currently, major components are procured from Haryana, where there is an existing plant, as well as other regions. Suzuki intends to establish a production system adjacent to the plant primarily for large parts such as car body components that are costly to transport.

  Maruti Suzuki has a total annual production capacity of 1.5 million vehicles, with 700,000 vehicles at the Gurgaon plant, and 800,000 vehicles at the Manesar plant, both of which are located in Haryana. With the new plant in Gujarat coming on stream, Suzuki's annual production capacity in India will increase to 1.75 million vehicles, and is expected to eventually reach 2.25 million.

Suzuki's production capacity in India

(units/year)

Company Plant 2016 2017 - 2019 - 2020s -
Maruti Suzuki India Ltd. Gurgaon 700,000 700,000 700,000 700,000
Manesar 800,000 800,000 800,000 800,000
Suzuki Motor Gujarat Private Limited Hansalpur 250,000 500,000 750,000
Start the first line operation Add the second line Add the third line
Total 1,500,000 1,750,000 2,000,000 2,250,000
Source: MarkLines OEM Plants data based on the figures released on the company's official website or media coverage.

Developing India into a global strategic base, expanding exports of locally manufactured vehicles

  Suzuki plans to develop India into a global strategic base. The OEM will manufacture global strategic vehicles in India in an effort to increase supply to the domestic market and grow exports.

  In September 2016 Maruti Suzuki announced it had achieved exports of 1.5 million vehicles from India. The automaker first began exports to Hungary in 1987 - 1988, and since has exported to 100 or more countries in Europe, Latin America, and Africa. Its major export destinations are Sri Lanka, Chile, the Philippines, Peru, and Bolivia. The OEM began exporting the Super Carry LCV to South Africa and Tanzania in May 2016, and plans to add southern Asian countries as export destinations in the future.

  In early 2016, Maruti Suzuki began exporting the Baleno hatchback to Japan as the first vehicle to be exported there under the Indian government's "Make in India" initiative. In addition to Japan, the Baleno is also exported to 100 or more countries including Australia and New Zealand, as well as countries in Europe and Latin America. As of June 2017, over 64,000 vehicles have been exported.



Establishment of a battery pack plant with Toshiba and Denso in response to stricter emissions restrictions in India

  On April 14, 2017 Suzuki, Toshiba, and Denso announced they have agreed to establish a new company for automotive lithium-ion battery packs in India. The company will be established in 2017 and production will commence within two years. The manufactured battery packs will be supplied to Suzuki's manufacturing subsidiary in India. The initial capital investment will be roughly JPY 20 billion. The joint venture will have capital of roughly JPY 2 billion, with Suzuki having a 50% stake, Toshiba 40%, and Denso 10%.

  In May 2017 Suzuki announced it has set the annual production capacity of its lithium-ion battery plant in India at 600,000 units.

Implementation of Euro 6 standards in India in 2020, Suzuki accelerates the release of environmentally friendly vehicles

  The Bharat Stage 4 standards (equivalent to Euro 4), which has been implemented sequentially in India since 2010, came into effect nationwide starting from April 2017. Rather than implementing Bharat Stage 5 standards (equivalent to Euro 5), the country will proceed directly to enacting the Bharat Stage 6 standards (equivalent to Euro 6) in 2020.

  In response to the strengthened regulations, Suzuki will move towards the electrification of its local models. The OEM has already released models featuring the Smart Hybrid Vehicle by Suzuki (SHVS) mild hybrid system, which is powered by lead-acid batteries and has been equipped in models such as the Ciaz and Ertiga diesel hybrid vehicles (HV). As of the end of March 2017, 60% of Ciaz models and 40% of Ertiga vehicles were equipped with SHVS.

  The new battery company will manufacture components from cells (single batteries) to battery packs in India in order to reduce costs enough to make it viable to feature them in compact vehicles. Suzuki aims to support the Indian government's "Make in India" initiative by realizing a stable supply of lithium-ion battery packs in India, while at the same time promoting the popularization of environmentally friendly vehicles.



Expanding sales outlets to 3,000 locations by FY 2020; increasing annual sales to 2 million vehicles

  At the end of June 2017 Suzuki announced it will expand its number of sales outlets to 3,000 locations in FY 2020. As of the end of March 2017, there were 2,312 dealerships. Additionally, in order to support the increase in demand for after-sales service, the OEM will also increase its number of service facilities from roughly 3,200 stores to 5,000 (of which service facilities that are combined with dealerships account for 3,000 stores).

  Suzuki aims to achieve annual vehicle sales of 2 million vehicles in India in FY 2020. The OEM sold 1.445 million vehicles in the period that ended in March 2017, and holds a nearly 50% share in India's passenger vehicle market. However, in recent years, competition in India is intensifying, with various automakers placing emphasis on India as a major market, and new OEMs entering the market. Suzuki plans to maintain its leading market share by accelerating the expansion of its sales network to gain a further lead against its competitors.

  Suzuki will increase the number of dealerships for its NEXA premium sales network, which is targeted at the rapidly growing middle class, and expand its lineup. As of the end of March 2017, there were 252 NEXA dealerships in India, with total cumulative sales of over 200,000 vehicles.

_ _
Source: Created based on SIAM documents
Note: Passenger Vehicles (PVs) market share, which includes passenger cars, utility vehicles (UVs), and vans.
Source: Created based on SIAM documents
Note: Each FY shows an aggregated value from April to March.


Expansion of the NEXA lineup, entry into new segments, and updating existing models

  Suzuki plans to release ten new models in India by 2019, including full model changes for existing models. In addition to the expansion of its NEXA premium sales network lineup, the OEM will also release new models such as the Vitara Brezza compact SUV and Super Carry LCV to enter new segments. Existing mass-produced models will be updated to support India's stricter emissions regulations and safety standards.

Expansion of the NEXA premium sales network lineup

  Maruti Suzuki is expanding its lineup of vehicles sold via the NEXA premium sales network. Following the release of the first model in August 2015, the S-Cross crossover SUV, the OEM released the new Baleno compact vehicle as the second at the end of October 2015. In January 2017 the OEM launched a new Ignis compact crossover, followed by an upgraded version of the premium Baleno RS with an infotainment system and improved safety features in March. In April, sales of the Ciaz mid-size sedan were shifted to NEXA.

S-Cross * The S-Cross crossover SUV was released on August 5, 2015 and is the first model released through the NEXA premium sales network. The vehicle is manufactured at the Gurgaon plant.
* Length: 4,300 mm, width: 1,765 mm, height: 1,590 mm, wheelbase: 2,600 mm
* The S-CROSS Features either a 1.3 liter DDiS 200 engine or a 1.6 liter DDiS 320 engine. Both are diesel engines. The 1.3 liter engine (maximum output 66 kW, maximum torque 200 N m) is mated with a five-speed MT, and has a fuel efficiency of 23.65 km/L. The 1.6 liter engine (88 kW, 320 N m) is combined with a six-speed MT and has a fuel efficiency of 22.70 km/L.
* The 1.3 liter model is available in four grades: Sigma, Delta, Zeta, and Alpha, and prices range from INR 834,000 to INR 1.075 million. The 1.6 liter model is available in three grades: Delta, Zeta, and Alpha, and prices range from INR 1.199 million to INR 1.374 million.
* The S-Cross is India's first premium crossover SUV. Maruti Suzuki invested INR 6 billion in its development.
Baleno * On October 26, 2015, Suzuki released the new compact Baleno. The vehicle is manufactured at the Manesar plant and is the second model sold through the NEXA premium sales network. From February 2017 production has been carried out at the new plant in Hansalpur, which is located in Gujarat.
* Length: 3,995 mm, width: 1,745 mm, height: 1,500 mm, wheelbase: 2,520 mm.
* The Baleno features either a 1.2 liter gasoline engine (61 kW, 113 N m) or a 1.3 liter diesel engine. The gasoline engine is mated to a five-speed manual transmission or CVT, and is available in four grades, with prices ranging from INR 499,000 to INR 701,000. The diesel engine is mated to a five-speed manual transmission, and is available in four grades, with prices ranging from INR 616,000 to INR 811,000.
* The Baleno is a global compact car. It was exhibited at the Frankfurt motor show in September 2014 and is the first vehicle to use the new HEARTECT platform. The vehicle is manufactured in India and exported to more than 100 countries and regions, including Japan and Europe. Suzuki set its mid-term sales target at 150,000 vehicles annually, including 50,000 exports.
* The Baleno made its Japan premier at the 2015 Tokyo Motor Show and uses a new platform exclusive for B segment vehicles. The powertrain mates either a newly developed 1.0 liter turbo engine with a six-speed automatic transmission, or a 1.2 liter engine with a CVT. The 1.2 liter model was released in the Japanese market on March 9, 2016, and the 1.0 liter turbo model on May 13th. The annual sales target has been set at 6,000 vehicles.
Baleno RS * The Baleno RS, a premium version of the Baleno compact hatchback, was released on March 3, 2017. The vehicle is distributed via the NEXA premium sales network.
* The Baleno RS features a "BOOSTERJET" 1.0 liter direct-injection turbo gasoline engine (maximum output 75 kW, maximum torque 150 N m). The vehicle also features a SmartPlay infotainment system, as well as various safety features such as dual airbags, seatbelts with pretensioners, and ABS with EBD.
Ignis * The new Ignis compact crossover was released on January 13, 2017. The vehicle is manufactured at the Gurgaon plant, and is distributed through the NEXA premium sales network.
* Length: 3,700 mm, width: 1,690 mm, height: 1,595 mm, wheelbase: 2,435 mm.
* The Ignis is available with either a 1.2 liter gasoline engine or a 1.3 liter diesel engine, mated to an MT or an AMT. The vehicle is available in four grades, with prices ranging from INR 459,000 to INR 780,000.
* Maruti Suzuki invested INR 9.5 billion in the development of the new Ignis. The vehicle has a local procurement rate of 98.5%, and was released in the Indian market following its release in Japan and Europe.
Ciaz * On September 1, 2015 Suzuki released a diesel hybrid version of its mid-size Ciaz sedan, the Ciaz Smart Hybrid. Prices range from INR 823,000 to INR 1.0175 million.
* The Ciaz Smart Hybrid features a Smart Hybrid Vehicle by Suzuki (SHVS) mild hybrid system, and a 1.3 liter diesel engine (technology licensed by FCA) combined with an integrated starter generator (ISG). The vehicle has a five-speed MT and is has a fuel efficiency of 28.09 km/L.
* The Ciaz Smart Hybrid participates in the Indian government's Faster Adoption and Manufacturing of Hybrid and Electric Vehicles, hybrid and electric vehicle (EV) manufacturing and sales promotion program.
* On September 12, 2015 new grades (VXi (O), VDi (O)) were added to the Ciaz lineup. The new variants feature improvements to safety features such as dual airbags, ABS, and seatbelts with pretensioners.
* The VXi (O) is priced at INR 748,000, and the VDi (O) at INR 837,500. The price difference with the VXi and VDi in comparison to the base grade is INR 17,000 and INR 14,500, respectively.
* Starting from April 1, 2017, the sales channel for the Ciaz was changed to the NEXA premium sales network. Since its release in October 2014 the Ciaz has sold over 150,000 units.

Ignis Ciaz
S-Cross (Photo: Maruti Suzuki) Ciaz (Photo: MarkLines)

New models: Entry into the compact SUV and light commercial vehicle markets

  In March 2016, Maruti Suzuki released the new Vitara Brezza compact SUV. The SUV has a length of less than 4 m, and with its release, the OEM now covers all segments in the passenger vehicle market. Likewise, the release of the Super Carry LCV in July of the same year marked Suzuki's entry into another market in India.

Vitara Brezza * The new Vitara Brezza compact SUV was released on March 8, 2016 and is manufactured at the Gurgaon plant.
* Length: 3,995 mm, width: 1,790 mm, height: 1,640 mm, wheelbase: 2,500 mm. The luggage compartment has a volume of 328 liters.
* The Vitara Brezza features a 1.3 liter diesel engine and five-speed MT, and has a mileage of 24.3 km/L. A gasoline engine version is also planned for release.
* The Vitara Brezza features automatic LED headlights, cruise control, SMARTPLAY infotainment system, and a rear view camera. Passenger seat airbags, and ABS with EBD are optional. Prices range from INR 699,000 to INR 968,000.
* The Vitara Brezza is Maruti Suzuki's first sub-4 m class compact SUV. It is the first vehicle from the OEM to have its exterior designed by Indian technicians. With the release of the Vitara Brezza, Maruti Suzuki now covers all segments in the passenger vehicle market.
* A year after its release, the Vitara Brezza has recorded sales of over 110,000 units and won over 25 awards, including the Indian Car of the Year 2017.
Super Carry * The Super Carry LCV was released on July 27, 2016. The vehicle is manufactured at the Gurgaon plant.
* Length: 3,800 mm, width: 1,560 mm, height: 1,865 mm, wheelbase: 2,110 mm. Maximum loading capacity 740 kg.
* The Super Carry features a 793 cc two-cylinder diesel engine (24 kW, 75 N m) mated to a five-speed MT and achieves a mileage of 22.07 km/L.
* Initially, the vehicle was sold exclusively in three cities: Ahmedabad, Gujarat; Kolkata, West Bengal; and Ludhiana, Punjab. Prices start from INR 401,000 (Ludhiana, Ex-showroom).
* With the release of the Super Carry, Maruti Suzuki has entered India's LCV market for the first time and established a dealership network exclusively for commercial vehicles.
* Production of the Super Carry started ahead of its release in the Indian market at the Gurgaon plant in March 2016, and it has been exported to South Africa and Tanzania since the end of May.

Vitara Brezza Super Carry
Vitara Brezza (Photo: Maruti Suzuki) Super Carry (Photo: Maruti Suzuki)

Facelifts: Hybrid vehicle added to the Ertiga range, new platform adopted for the Dzire

  Suzuki is also implementing facelifts to their mass produced vehicles. The OEM released an updated version of the Ertiga in October 2015, which has a share exceeding 20% in the Indian MPV market. Another version with the SVHS mild hybrid system was also added. In May 2016 the automaker released a facelifted version of the Alto 800, the bestselling car in India. The new model's mileage has improved by 9% in comparison to its predecessor. In May 2017 a new version of the Dzire compact sedan was released. The new model features the new HEARTECT platform and has improved safety features and an infotainment system.

Dzire * A new versions of the Dzire compact sedan was released on May 16, 2017. The vehicle is manufactured at the Manesar plant.
* Length: 3,995 mm, width: 1,735 mm, height: 1,515 mm, wheelbase: 2,450 mm.
* The Dzire is available with either a 1.3 liter diesel engine or a 1.2 liter gasoline engine. The diesel model has a mileage of 28.4 km/L, while the gasoline model has a mileage of 22.0 km/L.
* The Dzire is available with either a five-speed MT or a five-speed auto gear shift. Both the gasoline and diesel models are available in four grades, and prices range from INR 545,000 to INR 941,000.
* The vehicle features the new HEARTECT platform. Generous amounts of ultra-high-tensile steel and high-tensile steel materials are used for the body. The new Dzire has many upgrades to its safety features, such as dual airbags, seatbelts with pretensioners, and ABS with EBD; as well as an infotainment system supporting Apple CarPlay, Android Auto, and Mirror Link.
* Maruti Suzuki invested over INR 10 billion in the development of the new Dzire, which has achieved a local procurement rate of 99%. Following the release in India, the vehicle will be launched in neighboring countries, the Middle East, Africa, and Latin America.
Ertiga * An updated model of the Ertiga MPV was released on October 16, 2015.
* Safety features such as ABS and dual airbags come as standard on the base model. A model featuring the SHVS mild hybrid system has also been added. The SHVS model achieves a mileage of 24.52 km/L.
* In addition to a 1.4 liter gasoline engine and CNG model, a 1.3 liter diesel hybrid has also been added. The gasoline engine model features either a five-speed MT or a four-speed AT and is available in four grades, with prices ranging from INR 599,900 to 842,600. The diesel hybrid vehicle features a five-speed MT, and is also available in four grades, with prices ranging from INR 755,800 to INR 825,400.
* The Ertiga boasts a share exceeding 20% in the Indian MPV market.
Alto 800 * The Alto 800 entry level vehicle underwent a facelift and the new version was released on May 18, 2016.
* Length: 3,430 mm, width: 1,490 mm, height: 1,475 mm, wheelbase: 2,360 mm. The new model is 30 mm longer than its predecessor.
* The new Alto 800 features a three-cylinder 796 cc engine (maximum output 35.3 kW), and achieves a mileage of 24.7 km/L, 9% better than the previous model. The CNG version's mileage has improved by 10% in comparison to the previous model, achieving 33.44 km/kg.
* Optional features for the new Alto 800 include airbags, child locks, and keyless entry systems. The gasoline engine version is available in four grades, with prices ranging from INR 249,000 to INR 334,000. The CNG engine version is available from INR 370,000, and optional features are available from INR 376,000.
* The Alto 800 has remained the best-selling vehicle in India for twelve consecutive years, and composes 18% to 20% of Maruti Suzuki's domestic sales.

Dzire Ertiga
Dzire (Photo: Maruti Suzuki) Ertiga (Photo: Maruti Suzuki)


Reduction of indirect automobile taxes through the implementation of GST, all OEMs to reduce sales prices

  On July 1, 2017 the Indian government implemented a nationwide goods and service tax (GST). Through the implementation of the GST, the rate of indirect taxes, which was different depending on the state, have now been unified, and this is expected to increase interstate transactions.

  The GST has four levels (5%, 12%, 18%, and 28%), and the highest rate of 28% will be applied to automobiles. The GST rate for automobiles, motorcycles and tricycles, including additional taxes, will range from 28% to 43%. In comparison to the conventional rate of 30.2% to 55.3%, compact vehicles will only experience a minor tax reduction, but large vehicles and SUVs will see major benefits from the implementation of the GST. The preferential tax rate for hybrid vehicles will be replaced by a tax rate based on the GST classifications. EVs will maintain the same tax rate of 12%.

  All OEMs announced they would return the effects of the tax reduction brought by the implementation of the GST to consumers by reducing vehicle prices across the board. Maruti Suzuki announced it would reduce the price of its models by a maximum of 3%. At the same time, hybrid vehicles will see an increase in tax rates through the implementation of GST, meaning prices for the Ciaz and Ertiga diesel hybrid models will increase.

Indirect taxes placed on automobiles

Segment Until June 2017 After July 2017 Change
Total Breakdown
Motorcycle
(engine <350 cc)
30.2% 28.0% GST 28.0% -2.2%
Cess rate 0.0%
Motorcycle
(engine >350 cc)
30.2% 31.0% GST 28.0% 0.8%
Cess rate 3.0%
Small car
(length <4m; Petrol <1200 cc)
30.2% 29.0% GST 28.0% -1.2%
Cess rate 1.0%
Small car
(length <4m; Diesel <1500 cc)
30.2% 31.0% GST 28.0% 0.8%
Cess rate 3.0%
Medium car
(engine <1500 cc)
47.3% 43.0% GST 28.0% -4.3%
Cess rate 15.0%
Hybrid motor vehicle 30.3% 43.0% GST 28.0% 12.7%
Cess rate 15.0%
EV 12.0% 12.0% GST 0.0% 0.0%
Cess rate 12.0%
Large car
(engine >1500cc)
49.0% 43.0% GST 28.0% -6.0%
Cess rate 15.0%
SUV
(length >4m; engine >1500 cc;
ground clearance >170mm)
55.3% 43.0% GST 28.0% -12.3%
Cess rate 15.0%
Commercial vehicle 30.2% 28.0% GST 28.0% -2.2%
Note: Although taxation rates differed depending on the state prior to the implementation of the GST, the average rate is used in the chart above.
Source: Created by MarkLines via documents from the Central Board of Excise and Customs (CBEC) and various reports.


Production Forecast by LMC Automotive: Suzuki's light vehicle production to reach 3 million units in the medium term

(LMC Automotive, April 2017)

Suzuki's Light Vehicle Production Forecast

  According to LMC Automotive's latest forecast (April 2017), Suzuki's light vehicle production is expected to be 2.98 million units in 2017, up by 3.9 % from 2016. Higher volumes in India, Japan and Pakistan should counteract the predicted falls in Hungary, China and Indonesia.

  In India, its largest market, Suzuki will produce 1.63 million units in 2017, up by 7.6%. Suzuki had cut output of its top-selling but older models including the Alto, Swift and Dzire in order to ramp up build of newer and in-demand vehicles such as the New Baleno and Vitara Brezza. The automaker is also believed to have started rolling out the New Baleno from its new Hansalpur plant in Gujarat in February. This facility will add 250k units to Suzuki's annual capacity in India. Plus, a second line with capacity of 250k units per year is targeted to start by 2019.

  Suzuki's all-important Ignis made its debut in India in January. Maruti-Suzuki and its suppliers have invested close to USD 140 million to develop the Ignis, which is claimed to be 98.5% localized. The new vehicle notched up sales of 4.8k units in its first month. Moreover, it achieved a milestone in February, cumulatively selling more than 100k units of its mild hybrids; namely, the Ciaz SHVS (Smart Hybrid Vehicle by Suzuki) and Ertiga SHVS.

  Suzuki's production in Japan will jump to 772,084 units in 2017, up 12.6% from 2016. LMC Automotive comments; "Following Suzuki's addition of a hybrid version of the Solio to the Japanese market on 29 November 2016, we have upgraded our sales and production forecasts for the model in this edition of our report."

  In contrast, production at Magyar Suzuki's Hungarian plant to be 150,087 units in 2017, compared to 211,266 units in 2016, or down by 29.0%. LMC Automotive comments; "However, production of the key Swift model stopped in December 2016 (the new Swift will be sourced from Japan), leaving the plant building just two models, the S-Cross and the Vitara. At this stage, there have been no indications that the Hungarian plant will build any new models (it lost out to Japan with the Baleno) and, as such, it is unlikely that output will match the 2016 level for the rest of the forecast period."

  As for the medium- and long-term outlook, Suzuki's light vehicle production will be expected to reach 3 million units, given the continued increase in India. Meanwhile, its production in Japan is expected to be lower than 0.7 million units in 2020.

Suzuki's Light Vehicle Production Forecast

(Units)

COUNTRY GLOBAL
MAKE
2014 2015 2016 2017 2018 2019 2020
Suzuki 2,808,148 2,887,510 2,834,382 2,944,754 2,995,756 3,068,314 3,090,307
Maruti-Suzuki 32,411 35,666 36,037 38,047 0 0 0
Suzuki Group Total 2,840,559 2,923,176 2,870,419 2,982,801 2,995,756 3,068,314 3,090,307
India Suzuki 1,262,441 1,413,418 1,512,744 1,628,348 1,652,595 1,693,268 1,759,005
Maruti-Suzuki 2,260 0 0 0 0 0 0
India sub-total 1,264,701 1,413,418 1,512,744 1,628,348 1,652,595 1,693,268 1,759,005
Japan Suzuki 902,979 815,096 685,588 772,084 722,088 744,666 681,797
Indonesia Suzuki 147,985 133,630 134,574 113,322 119,488 143,802 152,493
China Suzuki 266,033 176,155 147,925 135,246 148,094 145,878 145,346
Hungary Suzuki 139,292 181,035 211,266 150,087 141,355 126,097 135,174
Pakistan Suzuki 49,919 98,725 75,973 75,529 123,993 128,175 131,074
Maruti-Suzuki 30,151 35,666 36,037 38,047 0 0 0
Pakistan sub-total 80,070 134,391 112,010 113,576 123,993 128,175 131,074
Thailand Suzuki 23,297 54,371 56,275 56,169 72,805 70,344 68,462
Iran Suzuki 453 1,308 1,573 4,380 5,488 6,609 7,119
Vietnam Suzuki 2,654 3,492 3,825 4,247 4,239 4,411 4,637
Ecuador Suzuki 5,863 5,978 3,123 3,775 4,096 3,504 3,599
Brazil Suzuki 4,173 2,118 1,516 1,567 1,515 1,560 1,601
Malaysia Suzuki 3,059 2,184 0 0 0 0 0
Source: LMC Automotive "Global Automotive Production Forecast (April 2017)
(Note) 1. Data indicate figures of only small-size vehicles, including passenger cars and light commercial vehicles with a gross vehicle weight of under 6 tons.
2. All rights reserved. Reproduction of any data will require permission of LMC Automotive.
For more detailed information or inquiries about forecast data, please contact LMC Automotive.

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Keywords

Suzuki, India, Maruti Suzuki, NEXA, Gujarat, Make in India

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