Instead of adding new capacity and risk underutilising it Suzuki will use its current Gurgaon-based plant for at least more two years
Suzuki Motorcycle India has put on hold investments for a new factory due to weak demand trend over the past several quarters and growing demand uncertainty over post-Bharat Stage VI (BS-VI) transition.
Instead of adding new capacity and risk underutilising it, the country’s fifth-largest two-wheeler maker will use its current Gurgaon-based plant for at least two more years.
"We have BS-VI coming in 2020 which will have a 10-15 percent increase in price. That will have a negative impact on demand so we have to be careful about investing in a new plant. The industry's total sales volumes may be unchanged or drop. My plan is to buy the land but not establish a factory. Only after the market picks up it will be right to establish the plant," Satoshi Uchida, managing officer deputy executive general manager in charge of marketing and India, Motorcycle Company, Suzuki Motor Corporation said.
The company is also strongly contemplating setting the plant next to Maruti Suzuki’s factory to gain from economies of scale and for the benefit of its suppliers.
"We need to buy the land together with Maruti Suzuki. We need one convenient location from the logistics point of view not just for us but for our suppliers as well," Uchida added.
The company, which makes models like the Intruder, Access and Gixxer has the capacity to make a million two-wheelers each year and is operating at around 80 percent utilisation.
"This year we reached 80 percent production. The existing capacity is good enough for two years considering the impact of the price hike under BS-VI," Uchida stated.
The entry-level models like 100cc and 110cc will take the maximum hit with prices expected to jump by 10-15 percent. For bigger and more premium models the jump could be 7-8 percent.
Till September-end Suzuki became the only company to clock a growth in sales during the past six months. The company sold 3.65 lakh two-wheelers recording 10.3 percent growth, though the industry declined by 16 percent.
To keep the growth momentum going Suzuki will launch two models every year comprising a new model and a model year change, upgrade or minor changes for existing models.
An all-new motorcycle powered by a 250cc engine is under development in Japan for the Indian market. This could be a cruiser or an adventure bike. Uchida said Suzuki is yet to take a call.
"After 250cc we are going to look at more models in bigger capacity bikes. We will have to add another 250cc bike may be a cruiser and after that, we go for bigger bikes. This will be through a new brand," he said.
Suzuki is also working on new powerful scooters that will have more than 150cc engines. It launched the Burgman Street some quarters ago with a 125cc engine and may use this model to test the 150cc segment.
"We are going to add more premium scooters. In future, we have to look at 150cc+ segment. We are studying the development of more than 150cc scooters. We will see how it works on the Burgman Street and then may use it for another model," Uchida added.
Encouraged by the success of the Access 125 scooter, which makes up 25 percent of Suzuki’s global two-wheeler sales, the company is now looking to have another 125cc scooter that could be launched in 2021.Nearly 40 percent of Suzuki’s global motorcycle sales come from India. In the near future, the company wants to take this number to 50 percent on the lines of Maruti Suzuki’s contribution to Suzuki Motor Corporation.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.