For Suzuki Motor, all roads lead to India

The fiscal that just went by was memorable for Suzuki Motor Corporation, with record sales of cars and two-wheelers. What was even more interesting was the growing role of India in both vehicle categories.

In cars, Suzuki sold an all-time high of 3.22 million units globally in 2017-2018. In fact, it was the first time that its annual tally crossed the three million mark, which by itself was reason to celebrate.

Quite unsurprisingly, India accounted for a lion’s share of over 51 per cent at 1.65 million cars. Its local arm, Maruti Suzuki, is the clear market leader with its closest rival behind by over a million units annually.

Regional numbers

Japan followed with 6.68 lakh units while Europe was next with 2.8 lakh units. The ASEAN region reported total sales of 1.67 lakh units with Indonesia alone taking up 1.14 lakh units, while Thailand, the Philippines and Vietnam accounted for the remaining 53,000 units.

Quite significantly, Indonesia’s recovery from 92,000 units in the preceding fiscal (2016-2017) was thanks to the surge in commercial vehicles and sales contributions of the Ignis and Baleno from India. Thailand, likewise, was up by nearly 12 per cent to 26,000 units in 2017-2018 owing to strong sales of the Ciaz coupled with the launch of the Swift’s full-model change in February.

The full-model change of the Ertiga, which debuted in Indonesia last month, will be equally significant for India. Both countries will continue to be export hubs for this multi-purpose vehicle.

The Ertiga was launched in these two regions in 2012 and has since reported sales of 6.8 lakh units in over 70 countries. The all-new version is expected to take the story to the next level with India and Indonesia doubling up both as the growth engines and manufacturing hubs.

In two-wheelers, Suzuki posted sales of 1.58 million units in 2017-2018 with India leading the rest of the pack with 5.01 lakh units. China followed with 3.92 lakh two-wheelers, while the ASEAN region reported a net tally of 3.68 lakh units. In ASEAN, Philippines topped the list with 1.65 lakh units and Indonesia was someway behind with barely 69,000 units.

Catching up on two wheels

Unlike its formidable presence in cars, Suzuki is still a marginal player in the Indian two-wheeler arena with the likes of Hero, Honda, TVS and Bajaj way ahead. Yamaha and Royal Enfield are relatively more accessible rivals. Suzuki, though, has been remarkably aggressive in recent times with plans to sell a million bikes and scooters annually by 2020.

By that point, the total two-wheeler market size in India is expected to be around 24 million units. Hence, even while it will continue to have a single-digit market share, Suzuki will have readied India as a global production hub with a second plant in place. While it lost valuable time over the last decade when it first set up shop after parting with TVS, it has since made up lost ground by shifting its focus to premium bikes and scooters. The company has realised there is no point playing a ‘me too’ game in commuter bikes and scooters where the likes of Hero and Honda dominate with their Splendor and Activa brands respectively .

Suzuki plans to keep the growth tempo going during the course of this fiscal too both in cars and two-wheelers. It has targeted sales of nearly 3.3 million cars for 2018-2019, which translates into a jump of 75,000 units. In two-wheelers, the goal is to sell 1.65 million units or an increase of over 65,000 units from last year’s levels. It is fair to infer that India will be the focal point of growth in both categories.

Nurturing the plant

Production of cars could reach two million units by early 2019 with the second line at the recently commissioned Gujarat facility. Given that production in 2017-2018 was already 1.78 million units, an additional 2.5 lakh units from Gujarat will become a reality early next year.

This also puts in perspective the growing role of exports in the coming years. Suzuki will leverage its manufacturing competencies in India to cater to markets in Africa and Latin America. And while Gujarat is the first big foray beyond its traditional home in Haryana, there is no telling how many more plants will be commissioned over the next decade as Suzuki endeavours to strengthen its market leadership.

What will also be an area of interest is the scope of the alliance with Toyota Motor Corporation. The two had decided to collaborate in R&D and clean vehicles but with product swaps also due by 2020, there could be even more intriguing dynamics at play.

Car swapping

Suzuki will supply Toyota its top-selling Vitara Brezza and Baleno in India while getting the Corolla in return. This may pave the way for more model swaps or even joint product development.

Suzuki has attempted global alliances with General Motors and Volkswagen in the past, which did not quite yield desired results. With Toyota, it has the comfort of a stronger Japanese ally and greater cultural compatibility.

After all, while it is a big player in India, Suzuki is still small in the international arena, which means a stronger partner is needed, especially with changing mobility challenges in terms of connected cars, cleaner fuels and so on. It seems pointless to speculate if there could be alliances for Suzuki two-wheelers as in the case with Toyota in cars. Yet, it may be recalled that Suzuki and Kawasaki had come together in 2001 to work on joint product development and global sourcing. To expect an encore would be wishful thinking but then who would have thought that erstwhile foes, Honda and Yamaha, would actually come together? For now, the scope of their partnership is confined to a small segment of 50 cc scooters in Japan, but there is no telling how the future will unfold.

Ideally, Suzuki would like to see its two-wheeler business in India reach the same spectacular levels of success as its cars. This is clearly out of the question with the kind of competition it has to reckon with.

The reverse holds true for Honda, which has been growing from strength to strength in its Indian two-wheeler business but faces greater headwinds in cars thanks to the overwhelming presence of Maruti Suzuki. And with Toyota now teaming up as an ally, the road ahead will become even more challenging.

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