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Mileage scandal: Maruti not singed by Suzuki on Day 1, stock recovers

epaper Updated: May 25, 2016 07:48 IST

Shares of Maruti Suzuki India tumbled 4% on Wednesday after Suzuki Motor Corp chairman Osamu Suzuki confessed that the Japanese carmaker made inflated claims of fuel efficiency. The Maruti stock, however, recovered and closed the day only 1.1% in the red after fervent claims by the company that there will be no impact on India.

Suzuki owns 56.21% of Maruti’s equity and some of its cars under investigation are household names in India: Alto, Wagon R, Baleno, SX4 S-CROSS, and Swift. Another, Ignis, will soon be here.

Maruti is India’s largest car maker, with nearly half the share of the market. Its market capitalisation is ` 118,324.76 crore on Wednesday’s stock price, almost equal to Uttarakhand’s GDP.

However, a Maruti spokesperson insisted there will be no direct impact on it because India follows a different system of certification done by government-approved agencies, whereas Japan has selfcertification. A Suzuki statement corroborated this, and said: “The above issues do not apply to products sold under the Suzuki badge outside Japan.”

Sudarshan Shreenivas, director of India Ratings and Research, said the impact on Maruti may not be much. “The competition is so tough in India that if Maruti was fudging fuel efficiency data, its sales would have fallen.”

In India, vehicles are tested by government-approved agencies, such as, ARAI, ICAT and VRDE. “Efficiency levels will vary as the cars are different. The same model will have more airbags, different wheels, and tested in different weather conditions,” said Maruti. Another critical difference is in the emission norms followed in the two countries; India has BS-IV and Japan the much more stringent Euro VI.

Some, however, disagree with Maruti’s defence. “Although this will make a major dent in the brand image of Suzuki in first-world countries, there will be some impact in third-world countries, too,” said advertising film director Prahlad Kakkar.

Car buyers in India are especially sensitive about fuel efficiency, which has made it a selling point. At the time Suzuki was holding a conference in Japan, Maruti issued a release that the new Alto 800 is 9% more fuel-efficient.

According to SMC, the tests to determine fuel efficiency were done in controlled conditions. Data of individual components, such as, tires, brakes and transmission were tested inside a wind tunnel instead of an outside environment as a part of rolling resistance test and air resistance test.

SMC is the second Japanese company to find itself engulfed in the mileage scandal; Mitsubishi Motors confessed to having cheated customers for 25 years. On Wednesday president Testuro Aikawa announced his decision to step down to take responsibility for scandal

First Published: May 25, 2016 06:58 IST