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Magyar Suzuki hopes to expand, tackle Russia and North Africa

Unused capacities are pushing Hungary’s second largest carmaker, Magyar Suzuki Zrt, to expand to Russia and North Africa.

Magyar Suzuki Zrt hopes to sell up to 30,000 cars in Russia, Belarussia and Kazahstan by 2012, which could make Suzuki one of Hungary’s largest exporters to Russia. “This year, the number of Suzukis exported to Russia could reach that of our biggest export market, Germany. Next year, it could even beat Germany to become the premier,” Hisashi Takeuchi, CEO of Magyar Suzuki said at the company’s annual business dinner.

Magyar Suzuki Zrt last year sold about 7,000 cars to Russia, many of which were SUVs like its Grand Vitara. In 2012, it hopes to sell up to 30,000 cars there annually, most of which will be smaller compact SX4’s as well as Swifts. According to Hishashi Takeuchi, the Russian market’s preferances are changing more towards compact vehicles, and this new trend could present a business opportunity for Suzuki in Russia, Belarussia and Kazahstan.

North African expansion

Magyar Suzuki is also hoping to expand North Africa, which it sees as a growth market for smaller cars such as a 1.6 liter SX4. It aims to sell its cars in Morocco, Tunisia and Egypt, and projects an annual market for about 10,000 of its cars in the three countries. The political uncertainties of Egypt and Tunisia are, however, restricting Suzuki to pursue only the Moroccan market, on which it hopes to start selling cars by this autumn. All together, Hisashi Takeuchi estimates about 3,000 cars could be sold there this year.

Magyar Suzuki has set up a joint venture in Moscow to distribute its cars. Russians still trust Japanese manufacturing more, so only about half of the cars for the market will be coming from Hungary, Suzuki’s only European plant, with the other half arriving from Japan. (Japanese manufactures of the same cars currently cost more than Hungarian manufactures because of the strong yen.) It now also has a distributor in Morocco.

The expansion of Suzuki is in part due to its need to fill its unused capacities. Its Esztergom plant is easily able to produce 200,000 cars annually, 220,000 if extra shifts are added. This means that 15-20% of its capacity is unused at the moment, and the Hungarian daughter company seems to have been given a semi-independence from its Japanese HQ to get new orders from new markets to balance stagnating European markets.

2010 results

Magyar Suzuki Zrt. sold the same amount of cars in 2010 as in 2009, 170,000 pieces. The company expects 2011 to turn out similarly, but is ready to review its plans during the year if the economic climate turns more positive. Its most important export market in 2010 was Germany with 18,000 cars sold, the UK with 14,000, and Italy and France with 13,000 each. Hisashi Takeuchi does not expect any of the company’s current markets to shrink in 2011.

Suzuki was the most popular car in Hungary for 13 consecutive years, however, it fell to seventh place last year, which the CEO felt could be due to the fact that Suzuki’s traditional buyers, middle-income families were loth to spend on new cars until the crisis had well and truly ended. "The private market segment almost disappeared, we were very limited in what we could do (to spur sales)", the CEO commented. Motorbike sales were struck even worse: almost half as many bikes were sold in 2010 as the year before.

Magyar Suzuki publishes its financial results in March or April with its Japanese parent company. It had a turnover of HUF 432 billion in 2009, a sharp fall from its 2008 revenues of HUF 609 billion.