Maruti now drives Suzuki's profit

The Indian car maker's share of Suzuki's consolidated profit rose to 46% during the year ended March 2009, up from 30% in the previous year. Maruti's topline is around 13% of the Japanese group's consolidated revenues. "Maruti is definitely becoming more and more important in the Suzuki stable," the Indian company's MD Shinzo Nakanishi told ET, adding that Maruti's net sales had risen 14% last fiscal year, a period that saw Suzuki's net sales fall 14% to 3.05 trillion yen. Maruti, in which Suzuki owns a 54% stake, ended 2008-09 with sales of nearly 800,000 units, its highest in 25 years, making it a rare bright spot in Suzuki's global operations, at a time when the automobile sector has been hit hard by a severe recession worldwide.

"All major markets, including the US, Europe and most of Asia along with Japan, were down last year. Maruti's performance has been much better than these markets," Mr. Nakanishi said. A Maruti spokesman said the company accounted for largest share of profit among Suzuki's global businesses, clarifying, however, that this profit was not repatriated to Japan, but held as reserves and reinvested in expansion projects, new models and new engines.

Maruti's rising clout in Suzuki pie will yield it two benefits in the future, Mr. Nakanishi said. It's parent will spend more on local research and development and grant it greater autonomy on export decisions. "Suzuki will definitely spend on R&D for Maruti, but with a focus on India and neighbouring markets," Mr. Nakanishi said. Maruti, which makes every second car sold in India, has already started taking a call on exports, independent of its parent's thinking. For instance, while Nissan is sourcing 30,000 units of Maruti's A-Star model to be sold as Pixo in European markets, Maruti is less eager to do such contract manufacturing deals.

"We want to do a small number of OEM-led export deals because the firms change offtake plans suddenly depending on demand," Mr. Nakanishi said. "So, although Suzuki in Japan is doing a Nissan-like deal with Mazda, we are not interested." Unlike the A-Star or Alto, which it ships for sale overseas, Maruti does not plan to export its new model Ritz, and is yet to take a call on whether it would phase out its oldest model, the M800. Maruti's capacity to produce one million cars a year means that it has enough headroom to roll out all its brands. "But if demand suddenly becomes so high that we don't have the capacity, we will do a rethink on which brands to phase out from our stable," Mr. Nakanishi said.