Suzuki may cut prices to counter Tata car

Written by Bloomberg | Tokyo, December 28: | Updated: Dec 28 2007, 23:00pm hrs
Suzuki Motor Corp, facing growing threats to its 50 per cent share of India's car market, may cut the price of its cheapest car in the country to counter Tata Motor's proposed 1,00,000 rupee ($2,500) car.

"We will have to do at least that," Shinzo Nakanishi, Managing Director of Suzuki's local unit, Maruti Suzuki India Ltd, said in an interview at the company's head office in Hamamatsu, Japan, yesterday. Suzuki's cheapest car in India, the Maruti 800, now costs from 192,124 rupees in New Delhi showrooms, according to Maruti's Web site.

Cutting prices may help Suzuki maintain dominance in its biggest market as the company faces greater competition from Tata and foreign rivals including General Motors Corp and Hyundai Motor Co. Other automakers including Renault SA have also proposed selling ultra-cheap cars in India, the world's second fastest-growing major auto market.

"By cutting prices, the profit margin will drop, and it may also hurt the brand image," said Koichi Ogawa, who helps oversee $28 billion at Daiwa SB Investments Ltd. in Tokyo.

"Investors care more about profitability than market share."

Suzuki fell 2.3 per cent to 3,370 yen at the 11 a.m. close on the Tokyo Stock Exchange. The Topix Transportation Equipment Index declined 1.4 per cent. Today is the last trading day of the year, and the exchange closed after the two-hour morning session.

In India, automakers are spending $6 billion to increase capacity as economic growth and rising incomes make cars affordable to more people. Vehicle sales may triple by 2015 in the country, where only seven in 1,000 people now own an automobile.