Here’s why Suzuki Motorcycle may have to invest in new capacity soon

With demand outstripping supply, the company’s existing plant is already being pushed beyond the limits. Suzuki’s Gurugram-based plant has an installed annual capacity of 750,000 units; however, based on its February production rate, the facility is operating at 116 percent utilisation level.

March 25, 2021 / 03:44 PM IST

If demand continues to remain robust, Suzuki Motorcycle India, the country’s sixth-largest two-wheeler maker, may run out of manufacturing capacity in a couple of years, a top company executive said to Moneycontrol.

Suzuki has seen demand head north over the past six months especially for scooters such as Access and Burgman. Though festive demand boosted overall two-wheeler sales, the ongoing marriage season and upbeat demand from rural areas have ensured that most factories are running at peak capacity.

Devashish Handa, Vice President (sales, marketing and aftersales), Suzuki Motorcycle India, said: “The demand recovery has been much steeper than expected. The industry is quite upbeat and confident. Everyone is coming back into investing mode.”

While Suzuki clocked a fall of 29 percent during the April-February period compared to the same period last year, it is currently running its plant at more than 100 percent capacity. Suzuki’s Gurugram-based plant has an installed annual capacity of 750,000 units; however, based on its February production rate, the plant is operating at a 116 percent utilisation level.

“Today, I am confident that we may not need additional production capacity for another year. We would like to see how the year unfolds. Our existing capacity should suffice for next year’s demand as per the growth plan we have,” Handa added.

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Suzuki’s Gurugram plant is spread over an area of 10 acres. The company has an additional 27 acres if an expansion is required.

As per data shared by the Society of Indian Automobile Manufacturers (SIAM), the two-wheeler industry recorded a 10 percent rise in domestic sales during the August-February period this year to 11.04 million units as against 10.02 million units clocked in the same period last year. The April-July 2020 period was the worst period for the two-wheeler segment with domestic sales plummeting almost 61 percent.

The sudden surge in demand for two-wheelers left auto component manufacturers in a quandary, with almost everyone struggling to meet the demand. This was especially true with the Tier 2 and Tier 3 suppliers.

“Business so far this year has been a roller coaster ride. But as the unlocking started, we experienced the tailwinds a little stronger than other sectors. It was a very sharp recovery. We also had a very different challenge of producing as per demand. The challenge was seen in the supply chain – less in Tier 1 and more in Tier 2 and Tier 3 supply,” he said.

“The vendors are working at 100 percent capacity but demand is higher. We are not yet fully out of the issue of a parts shortage,” Handa added.

Products

During the year Suzuki launched new variants of the Access 125 and the Burgman 125. These have Bluetooth technology, which, when paired to a mobile phone, can display turn-by-turn navigation, call, SMS and WhatsApp, estimated time of arrival, missed call and caller id alerts.

“The ride-connect feature has been lapped up very well. The result has exceeded our expectations. The connected variants have started to contribute over 30 percent to sales. In major cities such as Delhi, Mumbai, Pune and Bengaluru the share is in excess of 50 percent,” Handa added.

Suzuki has committed to launch, on an average, two products every year that can be ground up new products or upgrades. The company has a large dependence on scooters, with 95 percent of its domestic volumes coming from the segment. But the Japanese company is also striving to make motorcycles a mainstay of its offerings.

“We have decided not to participate in the commuter motorcycle segment, which happens to be 50 percent of the two-wheeler market. But at the same time, we would like to have a larger participation in the motorcycle space. As time progresses one would see a lot of focus and efforts in that direction. We are basically a motorcycle company. That’s an area where we have higher ambitions than we have been able to secure for ourselves with so far,” Handa added.
Swaraj Baggonkar
first published: Mar 25, 2021 03:44 pm

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