Suzuki upbeat about India two-wheeler business

At one level, Koichiro Hirao has reasons to be pleased because his company has been posting reasonably good growth at a time when the auto industry is in the midst of its worst slowdown in recent times.

Yet, the Managing Director of Suzuki Motorcycle India admits that the going has been “very tough for sure” in a market where all product segments are under pressure. At the beginning of this year, the sales target for Suzuki was 8.6 lakh two-wheelers for 2019-20 but it now looks as if it will end up at less than eight lakh.

“This year has seen the market going down, which is a bit unfortunate,” says Hirao. Both bikes and scooters are facing headwinds even though Suzuki has managed to buck the trend. This is, however, small consolation since the company will still fall short of its targeted figure.

Globally, for the first quarter (April-June), Suzuki has reported sales of 3.7 lakh two-wheelers of which India is the largest market with 1.74 lakh units. China’s tally is half this number with 87,000 units with the Philippines in third place with 52,000 units. The target for this fiscal is a little over 1.8 million units, of which Asia’s share alone is 1.5 million two-wheelers.

Biggest growth engine

It is a no-brainer that India will be the biggest growth engine even while the present state of the industry is hardly any cause for cheer. At one point, Suzuki had targeted a million two-wheelers from its Gurugram plant for FY 2020 and was keen on setting up a second facility to keep the growth story going.

It now looks as if this will have to be put on hold for a while. “As for the new plant, it is difficult to say anything at this point in time since we will be using our existing facility to work up to one million units,” says Hirao. The bigger concern is the possibility of any ad hoc legislative announcements that could throw plans out of gear. “Of course, I am keen on the second plant especially with the potential India offers in the coming years. Studies are still underway for the site and everything depends on the progress of the market,” he adds. Yet, Suzuki would rather wait and see how things work out on the policy front.

As Hirao says, any announcement on electric vehicles for instance could have a bearing on the company’s business plans. Even while the Centre has now made it clear that there will be no deadline for the phaseout of the internal combustion engine for two-wheelers, there is still a sense of uncertainty all around.

What’s in store?

Privately, companies have admitted that there is no telling what is in store “with all this back and forth happening” right from the time NITI Aayog set a timetable for 100 per cent electric mobility in two-wheelers under 150 cc only to have other government arms clarify that there was no such diktat. “We would like more clarity on the EV policy before we take any decision on the new facility,” reiterates Hirao.

It looks as if Suzuki will take a decision on the final location over the next six months. Till a couple of years ago, it was looking at setting up a plant in the South and had zeroed in on Telangana and Andhra Pradesh as prime choices.

This was then dropped in favour of Gurugram, its present home even while speculation is rife that the second plant could be an integrated facility with Maruti’s car plant expansion programme in the following decade. If this were to happen, it would be on the lines of Honda in Rajasthan, which has its two-wheeler and automobile operations in the same location for cost synergies in sourcing.

Hirao makes it clear that there is no such proposal on the cards since the top priority right now is to keep the growth momentum going. “We have our hands full with BS VI, which means costs will increase and FY 2020-21 will be even tougher,” he says. His colleague, Devashish Handa, adds that Suzuki will stay focussed on the premium space since this is the direction “in which customers in India are tilting towards”. From his point of view, everything is in place for this segment to take off in the coming years.

Devashish Handa, Vice President, Sales, Marketing and After-sales

“Per capita income is increasing and, as in the case of cars, there is tremendous aspiration among buyers. This is good news and we need to play to our strengths and focus on what works best for us,” says the Vice-President (Sales, Mkt and After Sales). In his view, the fact that the company is still reporting double digit growth ”shows the levels of market acceptance despite poor sentiment all around”.

Handa says the Burgman is gaining traction while the 125 cc Access has grown to become one of the leading scooter brands. “We are confident of the road ahead even while there is work to be done on motorcycles,” he says. Showrooms are being upgraded and there is a “comprehensive/concerted project going on” in terms of network enhancement.

Showroom upgrades

This will involve setting up a motorcycle zone within the exiting showrooms with a significantly premium feel. Most of the specs will be available on the screen where walk-ins can be addressed quickly. “We plan to do 250 of these zones, which will be branded premium, out of the 525 outlets we have. These will be spread across the country and focussed on markets where there is a growing trend towards 150 cc (and above) premium bikes,” says Handa.

Typically, some of these centres will include Bengaluru, Hyderabad, Chennai, Pune, Kolkata, Bhubaneswar and further east to Guwahati and Aizawl. According to him, the eastern part of the country “definitely has a fondness for premium bikes” where products like the Gixxer are doing very well. Going forward, Suzuki plans to increase the number of its two-wheeler outlets to 600 by the end of this fiscal. Handa says there is some work required to be done in parts of the north “where we need to be represented better and beef up our presence”. The network expansion will also factor in these new motorcycle zones but they will only be for those cities/towns where 150 cc-plus bikes have traction. “Our retail growth is still positive and we are now hoping the festive season works out well for us,” he adds.

Upbeat about future

Hirao chips in to say that the company is upbeat about its future in India especially when it has been pulling out all the stops over the last few years. This is in sharp contrast to the early years of its tenure after it parted ways with the TVS group in 2001. Sales were minuscule and it seemed as if Suzuki was only focussing on its automobile business through Maruti.

“In the past we were producing all kinds of products which were not successful. However now the focus has changed to higher displacement and premium models coupled with showroom upgrades,” says Hirao.

Today, there is a lot more energy within the ecosystem and even while the company is way behind the Big 4 — Hero, Honda, TVS and Bajaj — it is on a firmer growth path. “India is the No 1 market for us. The average age here is also very young at 27 compared to Japan which is 46. All this adds up to a bright future,” says the Suzuki Motorcycle chief.

India could also end up playing a much bigger global role for the company once the BS VI emission norms kick in from April 2020 and the country becomes even more closely integrated with global standards. The Japanese auto-maker will logically leverage the cost-competitive base and ship out products to markets that have equivalent emission standards. To that extent, the role of India as a global manufacturing hub for developed nations could increase substantially if everything goes according to plan.

COMMENT NOW