Suzuki aims to mitigate India risks with ASEAN strategy

Even though the dominance of Maruti Suzuki in one of the world’s fastest growing automotive markets could have once been considered a reason for comfort, it could prove to be a double-edged sword over the long term. Competition for Maruti Suzuki is intensifying and any disruption to the market (or its operations in India) would hit the parent company hard.

Translating this into numbers, India accounted for 42 per cent of Suzuki’s global sales in 2013. This compares with 28 per cent for Japan and nine per cent for China – Suzuki’s next two biggest markets. What is ironically worrisome is that India’s contribution is expected to rise further to more than 60 per cent by 2020 on account of the market’s faster growth and Maruti Suzuki’s domination.

Single Region Dependence on a single region can be risky and counterproductive especially during a downturn or any disruption in operations.

Being largely a small car player with a limited product line-up, there is little Suzuki can do to drastically change its geographic footprint. Still, it is trying to de-risk India by expanding operations in other regions such as ASEAN.

The process has already begun with the participation of Suzuki in Thailand’s Eco Car I program and start of production in the ASEAN country with the Swift hatchback in 2012. The Celerio has just been added to local assembly, and we are likely to see more models come to market.

Notably, the production start in Thailand also marks the beginning of a more focused ASEAN strategy to complement Suzuki’s operations in Indonesia, its largest ASEAN market with 70 per cent share of regional sales and where the brand is ranked third (behind Toyota and Daihatsu).

Going forward, this focused strategy will see nine new models launched in the region through to 2017.

From an Indian perspective, Indonesia also holds the key to Suzuki’s plans to find synergies between its India and ASEAN businesses. This plan started with kits export of the Ertiga to Indonesia, where the model has quickly taken the third spot in the all-important MPV segment behind the Toyota Avanza and the Daihatsu Xenia.

A reversal of this process is on the anvil with the pending launch of the Carry-based mini truck in India, whereby Suzuki Indonesia may send kits (modified for local requirements) for assembly in India. Thanks to the added volumes, this would help economise production costs and allow Maruti Suzuki to price the Carry competitively. At the same time, a passenger vehicle version based on the ‘Every’ is also not entirely out of question in the future.

Furthermore, the cross-border supply of kits between Suzuki’s India and ASEAN operations also presents a unique opportunity for Maruti Suzuki vendors to expand their overseas footprint. For instance, suppliers to the Ertiga, Wagon R or the Celerio can pitch for the automaker’s Indonesia unit (or ASEAN business, where shipments to Thailand also become a possibility).

The likelihood of more common models between India and ASEAN should lead to deeper integration between Suzuki’s operations, which in turn would benefit both the OEM and its supplier base.

Near Future Certainly, the reliance on India is not likely to be done away with in the near future; however, growth in other regions would partly shield the impact of any long-term slowdown in India.

This is especially important when demand at home and in Europe is estimated to decline over the long-term.

(The writer is Senior Market Analyst (ASEAN & India), LMC Automotive)

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