Suzuki Motor Company (SMC), the century-old Japanese auto giant, continues to be bullish on India, its biggest market in terms of the number of cars sold. It has set a stiff five-year plan for itself, but the Indian subsidiary Maruti Suzuki India (MSI) thinks the target set for the country is a cakewalk.

According to the mid-term management plan (April 2021 to March 2026) unveiled on February 24, which incorporates SMC’s philosophy of ‘Sho-Sho-Kei-Tan-Bi’ meaning smaller, fewer, lighter, shorter, and neater’, the company expects a recovery from the Covid-19 pandemic and growth in the Indian market, and aims for a record consolidated net sales of ¥4.8 trillion by 2025-26. For the current financial year, it has projected revenues of ¥3 trillion, 14.3% below its previous year’s revenues.

SMC hopes to end 2020-21 with global automobile sales of 2.38 million units, down from 2.85 million reported in the previous year. By 2024-25, SMC wants to achieve sales of 3.7 million units. A similar trend follows in its motorcycle business too. It hopes to achieve global sales of 1.48 million units, down from 1.71 million units reported in the previous year. It has pegged a target of 2 million units for 2024-25.

Of the targeted 3.7 million global sales, SMC expects India to contribute around 50%-52%, or around 1.9 million units by 2025. It aims to maintain a market share of over 50% in the passenger vehicles segment in India. In the current financial year so far (April 2020-January 2021), MSI has a 48.8% market share (1,002,876 units), down from the 50.89% (1,204,404 units) a year ago.

R.C. Bhargava, chairman of Maruti Suzuki India, told Fortune India that in 2019-20, total sales stood at nearly 1.6 million units. “So India can achieve much more than 1.9 million in five years. In 2020-21, our sales dropped because of the Covid-19 as we lost an entire first quarter,” said Bhargava. The company was hit hard by a months-long lockdown imposed in late March to slow the spread of the pandemic, reporting a quarterly loss in July, for the first time since its public listing in 2003.

“We are starting our new production facility at Gujarat by April 1. It will give us 250,000 units additionally,” he said, adding that there was no more capacity addition currently underway at any of its other plants.

MSI, the country’s largest car manufacturer, said in a recent regulatory filing that Suzuki Motor Gujarat Private Ltd (SMGPL) has started preparations to commence operations of the third plant at Hansalpur, Gujarat, in April 2021, subject to market demand. SMGPL manufactures cars on a contract basis for MSI.

The Indian government’s push towards e-vehicles seems to have forced SMC to do a rethink on its strategies. “In India, Suzuki will take the initiative in promoting electrification required by society in response to environmental issues in India, and maintain market share of more than 50% in the passenger car segment,” said SMC in its five-year plan. It also hopes to deepen the alliance with Toyota by cooperating in the electric vehicles (EV) space.

On the flip side, it will develop hybrid systems for mini, compact, and commercial vehicles; develop plug-in hybrids, and expand the range of vehicles equipped with it. On the other hand, it will undertake development of mini and compact EV models while utilising joint development through its global alliance with Toyota. The duo will develop a small EV platform and expand mutual supply of hybrid vehicles while also leveraging batteries for hybrid vehicles produced in India.

Interestingly, in 2018, SMC chairman Osamu Suzuki had set an ambitious vision for its future in India to maintain its dominant presence by selling 5 million vehicles in the country in 2030. The chairman had told a regular shareholders' meeting that the highly ambitious target was based on the company's estimates of overall new car sales in India in 2030—10 million, or more than three times the size in 2017—and rooted in its determination to maintain control of half the market. The Japanese carmaker had said it would triple its sales resources in India and sharply ramp up its local production capacity to achieve the sales target, which is more than three times the figure for 2016-17.

SMC, which celebrated its 100th anniversary in March 2020, has promised to give priority to three issues: CO2 emissions in use, CO2 emissions from production, and quality assurance. “Amid the global trend towards carbon neutrality, it is necessary to clarify Suzuki's efforts, and to place even greater emphasis on quality as shift to electrification and software development are to take place,” it said in the presentation.

“With regard to CO2 emissions in use, we will develop electrification technologies by 2025, fully implement these technologies in products from 2025, and make full-scale quantitative increase from 2030. We will proactively promote development of various technologies towards carbon neutrality. In terms of CO2 emissions from production, we will take on the challenge towards `zero’ CO2 emissions from production in 2050,” said the company.

On the investment front, it has promised to spend ¥1.2 trillion in five years (amounting to ¥240 billion per year) in capital investment and ¥1 trillion in five years (¥200 billion/year) on research and development.

For 2024-25, the operating income target is set at 5.5%, below the previous target of 7%, due to aggressive investment in research and development, such as electrification, which amounts to ¥1 trillion over 5 years.

For the first 10 months in 2020-21, SMC reported global production of 2,078,275 units in automobiles, of which 1,099,263 units were manufactured by the Indian subsidiary, accounting for 53%. Its production in Japan stood at 758,147 units, accounting for 36.5% of the total global production. The production in Japan includes all completely built-up (CBU) units and completely knocked-down (CKD) units.

According to the recent numbers published by Maruti Suzuki, the sales during the first nine months (April-December 2020) have dropped 18% to 965,626 vehicles as against 1,178,272 reported in the corresponding period in 2019. In segment-wise sales, midsize vehicles reported a drop of 53.2% to 9,367 units while mini plus compact vehicle sales slid 18% to 632,388 units. Exports by the Indian subsidiary have also fallen 21.9% during the nine months to 60,611. Exports account for 6% of total sales.

In January 2021, SMC’s total overseas monthly sales decreased year-on-year despite record-high sales in India. India reported overall sales of 160,752 units, 4.3% increase from January 2020.

Taking a review of its previous mid-term management plan, SMC said it achieved its net sales target in 2016-17 and 2017-18, and operating profit ratio target in 2015-16 to 2017-18, ahead of the scheduled plan. However, the target was not achieved in its final year of 2019-20 due to the slowdown of the Indian market, final inspection issue, and the Covid-19 pandemic. The company said there were cases of loss of customer trust, including quality problems, frequent recalls, and fraud in fuel efficiency tests and final inspection, during the previous mid-term management plan period.

In the motorcycle business, SMC has promised to build an attractive and diverse line-up using a common platform to secure sales of 2 million units and an operating margin of 5% or more.

As India sheds the pandemic-related recessionary trends and moves towards a faster growth curve, the Japanese car giant hopes to lock itself to a similar growth pattern in the country. No doubt India fits well in SMC’s slogan—`Small cars for a big future’. And MSI will continue to shine as a jewel in SMC’s crown.

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