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| Japan: Right place, right time |
| February 26, 2008 |
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The spectacular growth of vehicle use in India and growing environmental concerns have thrown the spotlight on Suzuki Motor. Suzuki, maker of small cars and motorbikes, may be a minnow compared with its larger Japanese rivals. But at a time when demand for cars is exploding in emerging markets and environmental concerns are making smaller, fuel-efficient cars more popular, its dominant position in the Indian car market and its focus on small cars have put it in the right place at the right time.
“There is a great deal of interest in Suzuki,” says Tatsuo Yoshida, auto analyst at UBS in Tokyo.
In contrast to Japan’s larger carmakers, which depend heavily on the uncertain US market, Suzuki appears, he says, “very well adapted to the times”.
Suzuki’s present good fortunes are the result of careful planning by Osamu Suzuki, its chairman and son-in-law of the founder. In the 1980s, when other Japanese carmakers were busy building their presence in the US, Mr Suzuki chose to go to India instead.
“The company did not have the right cars [for the US market] nor the financial resources,” says a Suzuki representative. But Mr Suzuki also saw the still undeveloped Indian car market as an opportunity for Suzuki, a latecomer in its home market, to stand out.
The charismatic Mr Suzuki wanted the carmaker to be number one somewhere. And India, where the government was seeking a partner to make a people’s car, was a good candidate.
At the same time, Mr Suzuki is likely to have been motivated by his strong desire to do something different from his larger rivals.
“On page two of Suzuki’s training manual is the commandment not to compete head-on with the large carmakers,” Mr Yoshida says.
Suzuki has a 55 per cent share of the Indian market, where its cars – made at its 54-per cent owned joint venture, Maruti Udyog – enjoy a loyal following.
The Maruti 800 has been sold in India for almost 25 years, since Suzuki began production there in 1983. Last year, Suzuki sold 255,000 Altos in a market of 1.44m.
While Asia is its biggest vehicle market as a region, Suzuki is also enjoying the benefits of buoyant demand in Europe.
Back home, the company has expanded sales on the back of a sharp rise in sales of mini-vehicles, with engine sizes of 660cc and under.
But even as it enjoys its time in the sun, Suzuki faces major challenges. For one thing, Suzuki needs to beef up its presence in China.
Suzuki’s motorcycle sales in China have surged on the back of strong demand in regional cities, but its vehicle operations have not been as successful as in India.
By contrast, in India, Suzuki has fallen behind in the motorcycle market, where Honda dominates.
The smaller carmaker is trying to rebuild its two-wheel presence in India, where its brand has been all but non-existent since it broke up with its joint venture partner in 2002.
More worryingly, Suzuki could face new competition in the Indian car market.
The super-low-cost Nano unveiled by India’s Tata is raising concerns that Suzuki could see its market share substantially eroded. The Nano is expected to retail for about Rs100,000, or half the price of Suzuki’s Maruti 800.
At the same time, other Japanese carmakers are beefing up their presence in the Indian market.
Toyota and Honda, whose product offerings in India have been on the more expensive side, have announced plans to produce low-cost cars that will compete more directly with Suzuki than their current offerings.
“That is the biggest threat” to Suzuki’s presence in India, says a company representative.Mr Yoshida of UBS says, though, that the Nano may not take buyers away from Suzuki cars. “I don’t think Suzuki will face immediate difficulty because … the Nano is for those who are riding three to a motorbike,” he says. He also believes Suzuki can live with the additional competition from its bigger rivals.
“Of course, Toyota will thrive [in India]. But Suzuki will also thrive, because the market is growing,” he says.
Mr Suzuki acknowledges that competition will be more challenging as the big Japanese companies enter the market in full force.
But he is confident the company can maintain its dominance. “We have been in the [Indian] market for 25 years and we are not going to give it up easily. We will forever maintain a 50 per cent market share,” he said recently.
The 78-year-old Mr Suzuki also brushes aside concerns about who will succeed him, which have grown after the untimely death of his son-in-law who had been tipped to take over.
“As for our future 10 years down the line,” he says, “I will be around so don’t worry.”
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