Maruti treads cautiously amid supply constraints 

by Mayank Dhingra 24 Feb 2022

The launch of the Baleno in Delhi

Maruti Suzuki is of the view that reaching 100 percent recovery is difficult for the following fiscal. According to its Managing Director, Kenichi Ayukawa, easing of supply constraints would help boost volumes over the last two years. 

The company is confident of demand for its cars continuing in the current scenario but still wants to tread cautiously as “there’s no clarity until how long the situation will continue”. 

Ayukawa, made these comments at the launch of the new Baleno. He said global economic conditions could impact the Indian economy and therefore, Maruti, had to keep a “careful watch”. 

This observation came a day before Russia’s invasion of Ukraine which could send oil prices, already inching towards $100/barrel, soaring further. With retail prices of petrol and diesel already at dizzy levels, the Centre could be compelled the revisit the issue of reducing excise duty levels on the fuels.

On the semiconductor shortage, Ayukawa said this varied with different types of chips. Maruti is trying to make the most of a challenging situation by focusing on increasing exports since it is able to source more volumes for chips export models require. Clearly, if chips can be comfortably sourced for models regaled locally, this will help boost its domestic market share. 

On rural demand, Ayukawa said the company would adopt a careful approach. While there is latent demand for sure, concerns persist around “its momentum and sustainability”. While its vast dealer network is its biggest strength, the challenge is to see how demand picks up in the hinterland region.

The Maruti Suzuki MD said CNG was a much cleaner alternative to both petrol and diesel. The company decided to exit the diesel business as it was not seen as being relevant to the future. 

With India striving to reduce oil  imports, “it is very difficult to continue playing in the diesel segment”. Yet, he cautioned that any transition to cleaner emissions should not be made at the risk of jobs being lost.

The company launched its second-generation Baleno hatchback six years after its debut in October 2015. Nearly 25,000 bookings have already been received thus far for this model which entailed investment of Rs 1,150 crore by Maruti and its suppliers. 

As part of its product swap pact with Toyota for India, the Baleno is retailed by the latter as the Glanza and has helped boost its volumes. Likewise, Toyota has rebadged the Vitara Brezza as the Urban Cruiser.

Globally, both Toyota and Suzuki have decided to join hands and pool in competencies at a time when the auto industry is undergoing massive change in terms of electrification and huge investments in new technologies. Suzuki is big in India and parts of ASEAN but quite small elsewhere while Toyota is the global monarch but struggling to build market share in India.

The coming together of the two companies will see strengths being shared which will include Suzuki’s tremendous cost-efficiencies and Toyota’s massive competencies in technology. These will be leveraged largely for India as well as markets like Africa and Latin America.

The electrification agenda in India will also see some interesting dynamics at play with the first product scheduled to be a midsize SUV as reported by Autocar Professional in its recent issue. Suzuki’s Gujarat plant will also be put to good use since it has been intended for exports and this will be a global SUV.

These are early days yet but it is clear that the next few years will see the partnership deepening in India and more synergies happening as a result.