Maruti to steer Suzuki's global investment drive

In 1981, it was the tiniest in the Suzuki empire.  Thirty-two years later, Maruti Suzuki India Ltd (MSIL) has become big enough to steer its parent’s investment drive all over the world.

Suzuki Motor Corporation  (SMC) of Japan had invested just about Rs 20 crore (Rs 200 million) to account for its 26 per cent stake in the small car project with the Union government. The roles seem to have reversed now.

MSIL will now take the lead and invest in all future assembly facilities in various parts of the globe for its parent. The decision could see the parent leverage the Indian arm’s Rs 7,000-crore (Rs 70 billion) cash reserves to make new investments abroad.

R C Bhargava, chairman of MSIL, said: “As and when we expand global footprint and decide to set up assembly operations overseas, the investments would be made by the Indian subsidiary. Vehicles would continue to sell under the Suzuki brand, as it is well-known in most markets.”

SMC has major manufacturing operations for passenger cars in India, Pakistan, Indonesia, China, Thailand and Hungary. It also holds 56.2 per cent stake in the Indian venture. 

Bhargava declined to comment on the places the company was exploring, but industry sources said the company could develop a base in the Association of Southeast Asian Nations region.

Bhargava said: “We are considering where it will be advantageous for us to set up assembly operations. Apart from the tariff structures in a particular country, we also have to evaluate the capability of the local component industry. It is important to do local value-addition, to benefit from commencing vehicle assembly.”

“Chairman Osamu Suzuki’s frequent visits are reflective of the growing importance Suzuki is attaching to MSIL in its global scheme of things,” Bhargava said. “There is little scope for growth in Japan. It is costly to export from there. Suzuki has to look at India for growth and also as a base for exports for more models.”

V G Ramakrishnan, senior director (automotive practice) at Frost & Sullivan, said, “Suzuki does not have the resources to invest in overseas facilities. RBI (Reserve Bank of India) guidelines are such that the parent company cannot take reserves out of the country, except through dividend payments or royalty fees, which are not so huge. So, India will take the lead and handle global expansion projects directly.”

MSIL contributed 45 per cent to SMC’s sales in vehicle units and 25 per cent to the Japanese giant’s sales revenues in the last financial year.