Suzuki Motor Corp said on Friday that they forecast a 1.7% rise in profit this year. The limited growth, they say, is due to an expected sales tax rise in Japan this year along with uncertain business conditions in their biggest market, India.
According to Reuters 22 analyst estimates compiled by Refinitiv predicted an average operating profit of 362.2 billion Japanese yen ($2.6 billion) for the year but Suzuki have announced a different expectation. Japan’s fourth largest automaker expects an operating profit of 330 billion yen ($3 billion) in the year up until March 2020.
Although they expect global vehicle sales to be at an all time high this year they’re also anticipating currency volatility, especially in the rupee and the euro, which have a negative impact on profit.
Suzuki had a great three-year run up until 2017 but they hit a bit of a wall due in part to slowing sales in India as well as costs related to recalling 2 million of their vehicles in Japan for inspection as the first time round they were inspected by uncertified inspectors. I feel like I’ve said inspect a little too much.
In India Suzuki are getting themselves ready for a slow turnout because of uncertain fuel prices and the stricter emission norms that are being put into place. They’re also going to suffer from the increased use of ride hailing services, like Ola or Uber, that can be accessed easily through apps on mobile devices. I mean why buy a car when you can hire your own private chauffeur from your pocket. Market uncertainty because of the Indian general elections is on the cards too, again damaging the sales of private cars.
With all these factors that will potentially effect Suzuki’s sales they still expect to sell a record breaking 3.34 million vehicles globally up until March 2020.
If things do go the way Suzuki has said and if they do see a decrease in profits this year it could mean that Suzuki will be behind many other automakers who are competing with one another in the development of low-emission vehicles (hybrids and electric). Suzuki won’t have the means to invest in such endeavours including that of the self-driving cars craze. One of their biggest competitors, Honda, is already making investments into this field with GM Cruise, investing $2.75 billion in the exclusive development of a new kind of autonomous vehicle. If Suzuki continues to lose out on profit keeping up with the technological advancements in the auto industry will prove to be a difficult task.