TOKYO (Reuters) - Suzuki Motor Corp (7269.T) on Thursday said it would earmark record investment this year for research and development into technologies such as electric vehicles (EVs) as it defends it dominance in its biggest market, India.
Higher R&D costs and a stronger yen will push operating profit down 9.1 percent in the current financial year at Japan’s fourth-biggest automaker, offsetting record global vehicle sales.
Suzuki joins Japanese peers in ramping up spending even as profit sags, at a time when industry focus is on electrification and automation amid demand for vehicles powered by cleaner technologies.
The company said it plans to spend 160 billion yen ($1.46 billion), up 15 percent from last year, to develop self-driving cars, EVs including gasoline hybrids, along with more efficient gasoline engines and connected vehicle systems.
Suzuki is ramping up investment in products for India, the world’s fifth-biggest passenger car market, based on estimates of demand reaching 10 million units annually by 2030 from 3 million at present.
Its Alto and Baleno compact hatchbacks and Vitra Brezza compact sport utility vehicle are among India’s best-selling cars. Suzuki dominates in India through a majority stake in the country’s largest automaker, Maruti Suzuki India Ltd (MRTI.NS).
“Maruti Suzuki’s market share (in India) is 50 percent, and we need to be considering now how we’re going to maintain that share in 2030,” Chairman Osamu Suzuki said at a briefing.
Suzuki expects profit of 340.0 billion yen ($3.10 billion) in the year to March 2019, versus a 374.6 billion yen median of 21 analyst estimates compiled by Thomson Reuters I/B/E/S.
The forecast assumes an average of 105 yen JPY= to the U.S. dollar, from 111 yen in the just-ended year, and 1.65 yen to India's rupee INRJPY=R, versus 1.73 yen.
That will result in a 22.0 billion yen profit hit from currency swings, while increased R&D expenses will knock off 20.0 billion yen.
Suzuki joins Toyota Motor Corp (7203.T), Honda Motor Co Ltd (7267.T) and others in seeing earnings slide due to a stronger yen, which can eat into repatriated profit and raises costs of exported vehicles and parts.
For the year ended March, Suzuki reported profit of 374.2 billion yen, outperforming analyst estimates.
Suzuki anticipates a 2.3 percent rise in global vehicle sales this year to a record 3.3 million units, led by a 6 percent rise in India. It expects to sell 1.65 million scooters and motorcycles, up 4.2 percent.
To establish a presence in the local EV market, Suzuki and Toyota have been deepening a partnership which will enable Suzuki to leverage Toyota’s R&D firepower to help it make EVs, while Toyota taps Suzuki’s compact car expertise.
($1 = 109.7500 yen)
Editing by Christopher Cushing