Suzuki Motor intends to make India its new hub for small cars.
The production base for small cars will move to India with the opening of its new plant in Gujarat when the automaker's main production base in Hamamatsu, Japan, will supply completely the local market.
Suzuki is following Hyundai and Nissan who have already made India their global production hub while Toyota and Honda have made the country a hub for some of their models.
Maruti Suzuki India chairman RC Bhargava told the Financial Express: "Small and large car exports from Japan have already become uncompetitive because of the appreciating yen so Suzuki is instead shifting small car production to India."
Suzuki has also developed a vast component vendor base and supply chain in the country. The labour cost in India is also less and Gujarat, being a coastal state, is ideal for exports.
Another Suzuki official said: "Gujarat is ideally suited for exports and this was why we chose to locate the new facility there. We have already bought two tracts of land - 640 and 470 acres - for about INR4.5bn (US$80.8m) and they are about 18-20km apart. The final clearance on the first phase of INR40bn investment is expected from the board in January, after which construction will start."
VG Ramakrishnan, managing director, South Asia, at consultancy Frost & Sullivan, said: "It's a fairly smart move for Suzuki and significant for profitability. They just have to make sure that local labour issues don't disturb global operations later. Car companies have to make India a hub to make India work as a market because, to keep prices low at home, they have to have high volumes."