VOLUMES or margins? India’s largest carmaker Maruti Suzuki India (MSI) has been up against a catch-22 situation for sometime now. More so with global car makers like Volkswagen, Nissan Renault, Peugeot, Chrysler and Proton firming up their India plans. Result: MSI is gearing up to consolidate its marketshare even at the cost of profitability.
Shinzo Nakanishi, who took over as MSI’s new managing director on Wednesday, told ET: “We have been saying for the past few quarters that the current profit margins are not sustainable and will be under pressure. Given our massive investments, changing product mix and new model launches, these profit margins are not sustainable in the future. We will focus on complete customer satisfaction and overall consolidation, even if it means sacrificing some profits in the short term.”
MSI profit margins have been facing a squeeze for the past few quarters. From 12.71% in the quarter ended June, it slipped to 10.3% in the last quarter ended September this year. The company’s profitability is likely to be hit by massive investments in new products, capacity upgradation and marketing strategies.
Incidentally, all these moves will follow SMC’s international format. MSI plans total investments of Rs 16,000 crore, with Rs 9,000 crore going into capacity expansion and upgradation. The balance Rs 7,000 crore will be spent on a new marketing setup and an R&D facility at Manesar in Haryana. The company is also planning big investments in new engine lines, which will be available in 3-5 years.
“Suzuki engineers are evolving the next-generation engines that will serve India and other global markets. We are investing heavily on these engines that will deliver higher fuel efficiency and conform to all futuristic emission norms. These will be available in all our future models,” Mr Nakanishi said