Other markets safe after Suzuki's Japan faux pas

Markets outside Japan not impacted; shares tanked 15% on the news reports, lowest level since November 2013

Japanese auto maker Suzuki Motor Corp, which owns a 56 per cent share in Maruti Suzuki, said it did not follow the home market’s rules related to testing of mileage. The company also clarified that the issue does not affect the cars sold in markets outside Japan, including India where its subsidiary Maruti enjoys a 48 per cent market share.

“Some discrepancies were found in the automobile emission and fuel efficiency testing process between the regulation by the ministry of land, infrastructure, transport and tourism (in Japan) and the actual method carried out by Suzuki,” the automaker stated.

Suzuki’s shares tanked 15 per cent on the news reports, its lowest level since November 2013. Maruti Suzuki’s stock slipped 3.6 per cent to Rs 3,808 early in the day but recovered to close at Rs 3,917 on the BSE. “The system of conducting vehicle mileage tests in India is distinct from the one in Japan. In India, all vehicles are tested for road load and emissions by government-approved agencies such as ARAI (Automotive Research Association of India), ICAT (International Centre for Automotive Testing) and VRDE (Vehicle Research and Development Establishment). As part of the emissions test, these agencies report fuel efficiency as well. Based on these reports, Maruti Suzuki voluntarily declares fuel efficiency of its vehicles,” said a Maruti spokesperson.

The Japanese Ministry had instructed auto makers to investigate actual fuel efficiency readings after Mitsubishi admitted last month that it manipulated fuel efficiency readings. Suzuki, the fourth largest automaker in Japan, said around two million vehicles were affected.

Reuters quoted company chief executive Osamu Suzuki as telling reporters in Tokyo that his workers did not intentionally use improper data. “The company apologises for the fact that we did not follow rules set by the country,” he said.

Suzuki put its 16 models to investigation, including Alto and Wagon R. Suzuki, however, said all its products comply with safety standards and assured its users to continue using the products with ease. Suzuki will continue to sell new cars in Japan and said it did not see an impact on earnings. Japan, Suzuki’s home market, has seen a decline in sales volume in recent times. The decline is offset by the double-digit growth in sales from the Indian subsidiary.  

“The above issues do not apply to products sold under Suzuki badge outside Japan. Suzuki assumes that the fact would not have any impact on forecasts for the consolidated operating results at the moment. If any matters occur in the future that require modifications to the consolidated earnings forecasts, such matter shall be promptly disclosed,” the company stated.

India, home to Suzuki’s highly profitable subsidiary Maruti, does not have a mandatory fuel efficiency norm. Carmakers here disclose mileage arrived through tests by agencies such as ARAI and ICAT. These are results of test under ideal conditions and never get replicated during actual on-road use.