Maruti Suzuki India, the subsidiary of Suzuki Motor Corporation of Japan, has managed to stay on top in the passenger car market since its inception in 1983. However, the company has been forced to embark on new strategies to fight global competition. S Nakanishi, managing director of Maruti Suzuki, also an old hand in the company, has the task of ensuring that Maruti does not lose its dominance in the compact car segment.
Maruti’s marketshare in India has dropped below 50% this fiscal year and that’s bad news for the company. It failed to anticipate a huge spurt in demand, even as its competitors ramped up sales in emerging markets like India. Car sales in the Indian market vroomed and grew by over 30% in the first 10 months of the current fiscal.
“We were caught off-guard as we did not anticipate such a huge spurt in demand,” says Nakanishi, whose association with the company dates back to the early 1980s when Maruti launched the first ‘people’s car’ in India. The good news though is that Maruti is still a jewel in the crown of the Japanese parent Suzuki.
Currently, it contributes to more than half of the total profits of the parent company and the share is expected to rise in the coming years due to all the global commitments. The Indian arm expects to shore up exports to meet the worldwide commitments of Suzuki Motor Corporation. “We now foresee India as the main hub for Suzuki’s worldwide operations. We already have A-Star being made only in India, but sold globally under Suzuki badge. In times to come, Maruti would be instrumental in the global fortunes of Suzuki and could also possibly make cars for the Japanese market,” says Nakanishi, a lawyer by profession, who started his career as a sales executive at Suzuki Motor Company in 1971.
With the demand for cars stagnating in Japan, Suzuki is leaning more towards its overseas subsidiaries to boost revenues and shore up profits. The company has subsidiaries in Pakistan, Hungary, Indonesia and Thailand, besides India. These subsidiaries contribute to over 70% of the parent company’s overall revenues. Suzuki had reported a nearly three-fold jump in its consolidated net profit for nine months ended December 31, 2010, at yen 42.61 billion (over . 2,350 crore) on the back of robust sales in Asia, mainly in India and Indonesia.
The Indian subsidiary’s contribution to the overall revenues is expected to surge when Maruti ramps up production to 2 million cars by 2015. Currently, the company makes over a million cars every year. However, with the rapid evolution of technology, Maruti also faces the challenge of technological obsolescence.
This has forced the company to launch new cars at frequent intervals to beat competition from carmakers such as Volkswagen AG, Renault-Nissan, Toyota, Ford Motors and General Motors.
“We are planning a 2020 vision for the company where Maruti would grab a larger share of the pie in the Indian market and also meet Suzuki’s global ambitions. Besides contributing to more than half the production, Maruti would be the largest export hub for Suzuki’s worldwide distribution network,” says Nakanishi.
The company has already earmarked investments aggregating to . 6,000 crore for its expansion plans. A new R&D centre in Rohtak (Haryana) to develop cars indigenously is also on the cards. Maruti is known for small cars and has dominated the hatchback segment with a dozen compact models.
However, the company is not closing its options to make bigger cars and sports utility vehicles. It has just launched Kizashi, the biggest sporty sedan, that made its debut in the US, but not in Europe. “Just as in Japan and Europe, Indian customers will switch to bigger cars as incomes rise with economic growth. So, we will enhance choices for customers and increase penetration in these segments,” says Nakanishi.
The company plans to develop future global models such as the Swift, Ritz and Sx4 in India and shift the technology base from Japan. “In times to come, new cars would need to have a global appeal. We are already developing cars in Japan for global markets. Similarly, cars developed in India will be shipped to all parts of the world. We plan to work on global designs and technology to meet world standards of safety and environment,” says Nakanishi, who also was nonexecutive chairman of Maruti from 2002 to 2007.
Maruti’s next challenge would be to develop alternative auto technology solutions like hybrid and electric vehicles at affordable prices as competition intensifies in the Indian market. It is also looking at the sports utility vehicle space for the Indian market and the company’s R3 Wagon, similar to Toyota’s Innova, is expected to hit the market early next year.
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