Amid slowdown Suzuki to hold back investments
Owing to the ongoing slowdown in two-wheeler sales and the expectation of a hit in the market by the transition to BS-VI emission norm from April 2020, Suzuki Motorcycle India Pvt Ltd (SMIPL) has decided to hold back its planned investments on capacity enhancement.
The slowdown in the auto sector, worst in nearly two-decades, has forced automakers to defer their planned capital expenditure, temporarily close operations at manufacturing units and even lay off employees. Recently, utility vehicles major Mahindra & Mahindra deferred its planned capital expenditure of around Rs 1,000 crore by a year.
The announcement by Suzuki to hold back investments come even as it has registered growth in a subdued market. According to its data, SMIPL has been the only two-wheeler firm to post double digit growth so far this fiscal. However, in August its growth rate came down to just over 2 per cent against double digit growth registered in previous months.
The automaker believes that uncertainty created over electrification of two-wheelers had also played a role in parent Suzuki Motor Corporation to adopt a wait and watch strategy before finalising on setting up a
new manufacturing plant in India.
The government’s think tank Niti Aayog had earlier proposed that two-wheelers below 150 cc engine capacity sold in India after March 31, 2025 should be electric ones only. However, last week Minister for Road Transport and Highways Nitin Gadkari said the government has no plans to ban the sale of petrol and diesel vehicles.
According to analysts, one of the reasons for reduced demand for automobiles has been confusion prevailing over the government plans to phase out petrol and diesel vehicles.
“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,” SMIPL VP (sales and marketing) Devashish Handa told PTI.
Vehicles prices are expected to rise up significantly as original equipment manufacturers have made huge investment to meet the new emission norms. Handa further said it may “have an impact similar to what the insurance regulation had in September last year”.
“The steepest were the five year insurance that took up the acquisition cost for the buyer to as high as 14-15 per cent overnight. Buyers have still to come to terms with the increased price point for a two-wheeler,” he said.