Auto Industry Slowdown Causes Suzuki’s Investment & Expansion Plans To Be Put On Hold

Suzuki Motorcycle India has put its investment plans on hold, given the current slowdown in the automobile industry. Suzuki Motorcycle India Private Limited (SMIPL) was in the process of acquiring land and investing in an additional manufacturing plant in India.

These plans have now been put on hold due to multiple reasons, the industry slowdown being one of them. Suzuki Motorcycle India is one of the largest two wheeler manufacturers in the country.

In India, Suzuki caters to multiple motorcycle segments. Right from the Suzuki Gixxer series in the premium commuter segment, to the Gixxer 250 and Gixxer SF 250 in the quarter-litre segment, and the Hayabusa and GSX-R1000R in the superbike segment, the company seems to have something for almost everyone.

Add to this list, the Suzuki V-Strom 650XT in the adventure-touring segment and the much-loved GSX-S750 in the mid-weight motorcycle segment. With such a variety of motorcycles, it is little surprise that Suzuki Motorcycle India was one of the only two companies that posted growth in the month of August 2019.

Suzuki posted a growth of 2.2 percent in August 2019 when compared to August 2018. This could be due to the fact that Suzuki Launched the Gixxer 250 in August. Suzuki Motorcycle India doesn't seem to like the risk of investing more in the Indian market at this stage.

The primary reason for this is the slowdown in the automotive industry and the uncertainty of when it would recover. The slowdown in the industry is not a secret anymore and some people are going ahead and calling it the start of a recession.

Several manufacturers are considering layoffs and a few others shut down production for a few days to deal with existing stock. Every single manufacturer in the country has scaled-down production and in such a scenario, Suzuki Motorcycle India feels ti is too risky to invest in yet another production plant.

According to Suzuki, the slowdown could worsen because of uncertainty over electric vehicles and the switch from BS-IV to BS-VI.

Devashish Handa, Vice-President of Sales, Marketing and After-Sales said, "The capacity enhancement is on the cards but it is not immediate. We would need a new facility but it would all depend on how the market responds to the BS-IV to BS-VI migration. That is very crucial and we are watching out for that."

The Indian automobile industry will switch to BS-VI emissions norms on 01 April, 2020. The norms have already made several changes to the industry. A few companies have announced the discontinuation of diesel engines as it would be too expensive to shift to BS-VI.

It is obvious that BS-VI vehicles will be a lot more expensive, thanks to the development costs involved. Devashish Handa went on to say that the BS-VI shift may have an impact similar to the new insurance regulations that came into effect in September 2018.

The insurance regulations mandated that all new vehicles should be sold with 5 years insurance policies and this increased the overall on-road cost by 14-15 percent. According to Devashish Handa, that is when the slowdown began.

Hence, Suzuki feels it is risky to invest more while the switch to BS-VI is on the horizon. Suzuki expects the entry-level two-wheelers with carburettors to be the worst-hit by BS-VI as the costs associated with the hardware upgrades will be massive.

Entry-level motorcycles will have to be equipped with a fuel-injection system, which needs an ECU, a fuel pump and an upgraded wiring harness to run. It will also require a catalyser in the exhaust system. This added expense will have to be borne by the buyer and could further result in a sales drop.

Thoughts On Suzuki Motorcycle India Holding Investment & Expansion Plans Due To Auto Industry Slowdown

The auto industry seems to be taking one blow after another. By putting investment and expansion plans on hold, Suzuki Motorcycle India is playing it safe. However, this investment could have given the industry a shot in the arm. It could have created employment for hundreds more. From the company's perspective though, what Suzuki is doing, is the right way forward.