Suzuki to build car plant in Japan, targets Higher Revenues

Japan’s largest small car manufacturer, Suzuki Motor Corp on Wednesday announced its plans to build a 60 billion yen (US$520 million) first domestic plant since 1992 to meet growing demand for small cars as fuel prices hike.

Suzuki, ranked fourth in sales volume behind local rivals Toyota Motor Corp, Nissan Motor Co Ltd and Honda Motor Co Ltd, said that the new plant would help it to expand production overseas, including in Hungary, India and Pakistan.

The new plant, which will be built in the central prefecture of Shizuoka, will have the capacity to produce 2.4 lakh vehicles a year, and bring Suzuki's global output to 3 million vehicles in 2009, the company said in a release on Wednesday. The plant will start operations in late 2008.

Meanwhile, besides its ramped up production plans, the company also raised its sales forecast for the current fiscal year 7% to 3 trillion yen (US$26.1 billion) from an earlier outlook of 2.8 trillion yen.

Suzuki is investing as demand for small cars increases amid record-high fuel prices. The auto market in Japan is in its longest drop-off since 1999, as consumers avoid large vehicles and attract to small cars. The Hamamatsu, Japan-based carmaker is confident that new models of compacts will win customers both at home and in its growing markets of India and Europe.

“If we stop expanding, we’ll lose,” to competitors, Chairman Osamu Suzuki said at a press conference in Tokyo. “Putting the new factory in Japan will make it easier to ensure quality.”

The company intends to spend 1 trillion yen to expand output and improve worldwide facilities in the five years ending March 2010. The carmaker earmarked a record 260 billion yen for capital investment this business year. The new plant will employ 2,000 people.

India is Suzuki’s largest overseas market. It intends to expand its production capacity in the country by 52% to manufacture 9.6 lakh vehicles in the year ending March 2010. Its new manufacturing facility in India is scheduled to roll-out later this year and Suzuki plans to add new lines over the next four years. Suzuki owns 54% stake of Maruti Udyog Ltd, India’s largest carmaker.

Chief Executive Osamu Suzuki said the auto maker would aim an increase in profits in order with the higher revenue forecast by sticking to its actual profit margin plan. That would imply an operating gain of 123 billion yen instead of the official 115 billion yen, at the targeted margin of 4.1%.