Suzuki revs up for Tatas Rs 1 lakh car

Dec 28 | Updated: Dec 29 2007, 06:17am hrs
Suzuki Motor Corp, facing growing threats to its 50% share of Indias car market, may cut the price of its cheapest car in the country to counter Tata Motors Ltds proposed Rs 1,00,000 car. We will have to do at least that, Shinzo Nakanishi, managing director of Suzukis local unit, Maruti Suzuki India Ltd, said in an interview at the companys head office in Hamamatsu, Japan, on Thursday.

Suzukis cheapest car in India, the Maruti 800, now costs from Rs 1,92,124 in New Delhi showrooms, according to Marutis 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 worlds 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% to 3,370 yen on the Tokyo Stock Exchange. The Topix Transportation Equipment Index declined 1.4%. Friday was the last trading day of the year, and the exchange closed after the two-hour morning session. Concern about instability after the assassination of former Pakistani prime minister Benazir Bhutto may have contributed to Fridays share decline, Ogawa said.

Suzukis Pakistani unit, Pak Suzuki Motor Co, is the countrys largest automaker and plans to increase production capacity to 2,50,000 vehicles by 2009, from 1,20,000 now, to meet rising demand. 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. Suzuki, which started selling cars in India in 1983, is relying on growth in the country and in Europe as demand wanes at home.

Sales in India of the companys Swift, Alto and other models rose 18% to 3,36,758 in the six months ended on September 30, surpassing Suzukis sales in Japan for the first time. Indias annual passenger-car sales more than doubled in the past five years to 1.08 million in the 12 months ended March 31, according to the Society of Indian Automobile Manufacturers. The total may reach 3 million by 2015, the government estimates.

Renault, Volkswagen Aiming to tap the growth, Renault and Volkswagen AG began selling cars in India in the past two years while Honda Motor Co, Japans second-largest carmaker, plans to unveil its first hatchback model in the country to take on Suzuki. CSM Worldwide estimates Suzukis share in India may drop to 24% in 2013 as cheap cars increase competition.

So far, its been easy to maintain a 50 to 55% share, because there werent strong competitors, Nakanishi said on Thursday. But from now on, it wont be the case. Tata Motors, Indias largest truckmaker, will unveil its $2,500 car in New Delhi on Jan. 10. The yet-to-be-named model would be the nations cheapest car and target motorcycle buyers. India is the worlds second-largest motorcycle market behind China. Nissan, Bajaj Renault and Nissan Motor Co, Japans third-largest automaker, are planning to build a $3,000 model with Bajaj Auto Ltd, Indias second-largest motorcycle maker, to compete in India.

Bloomberg