Japan’s Suzuki Motor Corp raised its annual operating profit forecast on Friday in a surprise move, as quarterly results beat estimates thanks to strong vehicle sales in India and Europe.
The automaker dominates the Indian market, its largest, through its majority stake in Maruti Suzuki India Ltd and the results come on the heels of a report that the Japanese automaker will invest in a second production line at a new plant in the country.
The maker of the Swift subcompact hatchback now sees operating profit climbing 2.4 percent to 200 billion yen ($1.9 billion) in the year to March. It had previously forecast a profit decline of 7.8 percent – an estimate that was in line with analysts’ predictions.
For the second quarter, operating profit climbed 23 percent to 56.3 billion yen, according to Reuters calculations. That beat an average estimate of 38.3 billion yen from 11 analysts surveyed by Thomson Reuters I/B/E/S/.
Suzuki will invest about 100 billion yen ($970 million) in a second vehicle production line at its new plant in Gujarat, even before operations have begun, the Nikkei business daily reported on Friday. The second line could debut in early 2019, the report said, and will manufacture the same yearly volume as the first production line which is scheduled to open next year and will have an annual production capacity of 250,000 vehicles. The addition of the production lines are expected to increase Suzuki’s manufacturing capacity to 2 million cars a year, the paper said. The new factory in Gujarat will manufacture models such as the Baleno hatchback, with vehicles for export also being considered due to Gujarat being a major port, Nikkei said.
Maruti last month beat expectations with a 60 percent surge in second-quarter net profit as demand grew for its compact and utility vehicles.
Suzuki now expects vehicle sales to grow 12.2 percent in Europe and 9 percent in India this business year. It previously said vehicle sales would grow 4.3 percent in Europe, and 7 percent in India.
Maruti Suzuki, had earmarked an investment of about 185 billion rupees ($2.77 billion) for the Gujarat plan in December last year, to set up six production lines capable of producing 250,000 vehicles each, Reuters reported in December. Suzuki Motor said vehicles sales in India, its biggest market, rose 5.2 percent in the April-June period.