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Suzuki Motor’s Improving Operating Income Was Dealt a Blow by the New Coronavirus in Q4 of FY 2019
Suzuki Motor’s consolidated financial performance declined in fiscal 2019. Sales revenue fell 9.9% year-on-year to 3.48 trillion JPY and operating profit decreased 33.7% to 215.1 billion JPY. Decrease in sales and profits is mainly due to sales slump in India and Japan. Looking at Suzuki’s operating income on a quarterly basis, it fell 46.2% in the first quarter in fiscal 2019, 31.8% in the second, 10.8% in the third and 34.2% in the fourth. Despite showing steady recovery, operating income dropped in the fourth quarter due to the outbreak of the new coronavirus.
In the automobile sector, Suzuki’s sales revenue fell 10.6% to 3.15 trillion JPY and operating profit declined 35.1% to 197.1 billion JPY. Global sales of automobiles fell 14.3% to 2.85 million units, dropping below 3 million units for the first time in three years. Sales declined in all markets across the board. In India, where the market recovery was delayed by the country’s economic downturn, the new coronavirus dealt an additional blow at the end of fiscal 2019. In Japan, sales decreased due to the effects of typhoons and the consumption tax hike in addition to the impact of production reduction following the restructuring of the automaker’s final inspection system.
The financial forecast for 2020 is undecided due to the impact of the new coronavirus. The recovery of the Indian market is difficult to forecast which is a major concern for Suzuki. In India, the number of vehicles produced was zero in April 2020, but production gradually resumed from May 12. As of the end of May, about one-third of Suzuki’s stores in India remained closed. Sales in May are expected to be around 10,000 units, down 90% from the same month of the previous year. Assuming that production will return to full scale from July, Suzuki is aiming to make up for the production cut during the April to June period from July to September. In Japan, production adjustments were implemented in April and May due to partial delays in parts procurement from the Philippines and India. Suzuki intends to fulfill backorders and revive business performance by the end of 2020.