Suzuki to allocate bulk of $1.5 bn R&D spend to Indian unit Maruti
14 May 2018
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Most of the $1.5 billion allocated by Suzuki Motor Corp for research and development will be spent on Maruti Suzuki India, its most profitable unit, to help the it maintain its 50 per cent market share, Mint reports citing sources.
The money will be used to upgrade Maruti Suzuki’s existing models to Bharat Stage VI emission norms, most stringent globally, by 2019 to develop a range of hybrid vehicles and other alternative technologies, the report said.
Reuters on 10 May reported that Osamu Suzuki, chairman of Suzuki Motor Corp, in a post-earnings conference call, said the company needs to find ways to maintain its current market share in India till 2030, when the Indian passenger vehicle market is tipped to touch the 10-million mark annually.
According to one of Mint’s sources, Maruti Suzuki has a huge task in upgrading its existing 14 models to comply with the BS-VI emission norms, which will take effect on 1 April 2020.
A full range of hybrid vehicles, from the current SHVS or mild hybrid to full hybrid and plug-ins,will also be developed by the company in association with Toyota.
“The company will focus on making the full range of hybrids as meeting the CAFE (corporate average fuel efficiency) norms will be impossible without hybrids,” said the person.
The new spends on R&D will take a toll on Suzuki’s earnings (and of Maruti Suzuki to an extent) for the financial year ending 31 March 2019, Suzuki has said in a forecast.
The operating income of the company would decrease by 9.1 per cent to 340 billion yen as a consequence of higher research and development expenses and appreciation of yen against the dollar. The net income or the net profit of the company would decrease by 5 per cent to 205 billion yen.
In FY18, Suzuki’s net sales grew by 18 per cent to ¥3757.2 billion, while operating profit jumped by 40 per cent to 374.2 billion yen. Consequently, net income increased by 34.9 per cent to 215.7 billion yen — the highest since 1977— on the back of surging sales in India and recovery in European markets.
Apart from infrastructure like charging stations, the development of more fuel efficient gasoline engines is also on the cards.
In a first, Suzuki has also tweaked its organisation structure globally to include a new department to develop electric vehicles.
“Suzuki has the technology, but it is not adequate to meet the competition. Hence, investment needs to be there. New technologies have to be developed as the government of India is very serious about it,” R C Bhargava, chairman of Maruti Suzuki, has said.
