Suzuki Has a Bright Future in India

Introduces SWISH 125 Scooter

Introduces SWISH 125 Scooter

Introduces SWISH 125 Scooter
Introduces SWISH 125 Scooter | Source

Launching Of Electric Vehicles Poses Problems


Introduces SWISH 125 Scooter

Suzuki is a great name in the world of cars and two wheelers. The Japanese giant has conquered the whole world with its quality products that appeal to people in all countries. Now Suzuki has expanded its gearless scooters range in India. Suzuki Motorcycle India Private Ltd is a subsidiary of Suzuki Motor Corporation of Japan in India. It launched its SWISH 125 last year. This scooter combines modern styling and fuel efficiency with excellent design features. Access 125 is the company’s best selling scooter in India. Now SWISH 125 may overtake it in sales. It has a four stroke 125 cc engine.

Launching Of Electric Vehicles Poses Problems

Suzuki is also considering launching of electric vehicles in India. But it is seeing infrastructure as a big challenge to its plans. Suzuki was also planning to launch more diesel engine cars in India earlier, but after the budget it is not clear whether it will go ahead with its plans. The Budget has proposed to levy duty on diesel. But the company is refusing to elaborate on details. Cars running on electricity, LPG and CNG have infrastructure problems in India. But in Delhi, cars running on CNG (compressed natural gas) have been a success thanks to the CNG refill stations established by Indraprastha Gas throughout Delhi. But in other cities, this kind of infrastructure does not exist. Suzuki showcased its Swift electric car hybrid in the Tokyo Motor Show last November. It also introduced a new version of Alto called Alto Eco which has a fuel efficiency of 30.2 km per litre. Suzuki also showcased in the show its concept electric scooter and its new Swift Sport car.

Launches M800 Cruiser Bikes

Last year, Suzuki launched its Intruder M800 cruiser bike in India. It is priced at Rs.8.88 lakh. The cruiser bike has a powerful 805 cc engine. It has been launched in 12 cities across India. It is definitely attractive to Indian youth who want to ride fast on Indian roads. This bike is an entry level bike. Already the company has launched more sophisticated M800 bike priced at Rs.13.25 lakh. It has also launched the GSX-R1000 bike priced at Rs.13.75 lakh, Bandit 1200S bike priced at Rs.8.8 lakh and the Hayabusa priced at Rs.13 lakh.

Labour Dispute in Maruti Suzuki Dents Image

The image of Suzuki was sullied in India because of the labour dispute in the Maruti Suzuki plant at Manesar last year. In fact the dispute has been going on for the last two years and the company was unable to solve it. Instead of solving it, the company only fuelled the dispute further by its refusal to permit free trade unions in the factory. Subey Singh, the President of labour work force in the company’s subsidiary Suzuki Powertrain India Ltd alleged that he was offered huge payments by the Suzuki management to quit the company. Suzuki denied this allegation. But now the company has shifted its Maruti Suzuki plant to Gujarat where labour relations are more cordial. Even then the production loss sustained at the Maruti Suzuki plant amounting to several hundred crores of rupees is difficult to compensate.

War of Words between Suzuki and Volkswagen

There is also a war of words and dispute going on between Suzuki and Volkswagen AG of Germany. Volkswagen has alleged that Suzuki has infringed a partnership deed. Suzuki is denying the allegation. Volkswagen’s allegation is that Suzuki violated a cooperation agreement by buying engines from Fiat SpA. But Suzuki is denying that any agreement had been breached through its act. Suzuki Motor Corporation’s Chairman Osamu Suzuki stated in last September that Volkswagen’s allegation disparaged Suzuki’s honour. It is noteworthy that the cooperation agreement between Volkswagen and Suzuki has not resulted in any joint venture project so far. Volkswagen owns 19.9% stake in Suzuki which is worth 222.5 billion Yen ($2.9 billion). Suzuki also stated that it wanted to end its partnership with Volkswagen. This partnership was envisaged to help Volkswagen to expand on the Indian sub-continent. Volkswagen has been the biggest European car manufacturer.

Gujarat Becoming an Auto Hub in Asia

Suzuki was planning last year to locate its $1.3 billion passenger car factory in Gujarat. Suzuki controls around 50% of Indian car market through its subsidiary Maruti Suzuki in which Suzuki has a stake of around 54%. Gujarat state has been fast becoming an auto hub of Asia. Several automobile companies have moved into the state because of the business friendly policies of the Gujarat government headed by Narendra Modi. At present Maruti Suzuki has two production bases in India in Gurgaon and Manesar. Its Gujarat facility will be the third. Maruti Suzuki has the total capacity to manufacture one million cars every year. Ford has already moved its $900 million production base in Sanand in Gujarat. Peugeot has also joined the bandwagon with an investment of $933 million. Now Maruti Suzuki has jumped in. Tata Motors, when driven out of Singur in West Bengal by Mamata Banerjee, relocated its production base in Gujarat.

Competing Against Harley Davidson and Yamaha

Competing Against Harley Davidson and Yamaha
Competing Against Harley Davidson and Yamaha | Source

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Suzuki Has a Bright Future in India


Agreement Signed On an Inauspicious Date and Time

The two year old ties between Suzuki and Volkswagen damaged the reputation of Suzuki. The two year marriage was finally dissolved when Suzuki snapped its ties with Volkswagen. The agreement between the two was signed in December 2009 on a date which was inauspicious according to Indian astrology. The agreement was doomed to failure from the very beginning. The agreement aimed at speeding up Suzuki’s development of eco friendly vehicles such as electric cars, hybrids and fuel cells. But no such work ever was started. Volkswagen is wooing Fiat even as Suzuki is offering to buy-back Volkswagen’s nearly 20% stake in Suzuki worth around $2.2 billion. Suzuki has a 1.5% stake in Volkswagen worth $950 million. But Volkswagen is refusing to end the partnership with Suzuki and has asked Suzuki to continue it.

Both Volkswagen and Suzuki Need Each Other

The truth is that both Volkswagen and Suzuki need each other. Volkswagen may be a big auto major in Europe but it has no technology to enter into the small car segment which is highly competitive in the Indian sub-continent and China. Similarly Suzuki may be a bigwig in small car segment but it has no technology to make hybrid and fuel electric vehicles. In politics, this kind of war of words is understandable. But in business and that too in big business, the executives usually avoid bickering in public over their differences. Even big differences are sorted out across dinner in five star hotels. It is a surprise that a Japanese corporate major and a European bigwig are quarrelling on petty issues before the full and glaring public media view. The entire quarrel started when Suzuki picked up Fiat to supply 1.6 litre diesel engines to its Hungarian built SX4 cars. This dispute could have been amicably solved in negotiations. Volkswagen started the quarrel first with its publicly made remarks against Suzuki and Suzuki responded to this allegation. Both sides seem to be relishing in quarrelling with each other.

Raising Stake in Maruti Suzuki

Suzuki is planning to raise its stake in Maruti Suzuki by 5% from 54% to 59%. This plan had been under consideration of Suzuki management for quite some time now. The purchase may be effected through a creeping acquisition route spread over a year. In other words, Suzuki plans to buy 5% of the stake in the open market without triggering the open offer rule. Financial institutions hold 21% stake in Maruti Suzuki. As Maruti Suzuki is a profit making company, more shareholding means more revenues for Suzuki Motor Corporation of Japan. Suzuki will have to shell out around $400 million (Rs.1800 crore) for the acquisition. There is also a possibility of de-listing the Maruti Suzuki shares at a later date.

Market Leader in Premium Segment of Bikes

Suzuki plans to invest 2.1 billion Yen ($26 million) to build a motorcycle production plant in the suburbs of Manila in Philippines with a capacity of 2 lakh units per year. Suzuki plans to foray into the 100 cc motorcycle segment in India dominated at present by Hero and Honda. Bajaj Auto is also doing well in this segment. India is world’s second largest two wheeler market. In the big bikes market, Suzuki is clearly the market leader in India with its Hayabusa. Suzuki is planning to double its annual production capacity to 5.4 lakh units in its Gurgaon plant.

Competing Against Harley Davidson and Yamaha

Suzuki is a big brand in India. But it is yet to match the success of its car brand with its motorcycles segment. The current growth of Suzuki’s two wheelers is led by scooters in India. In the last one year, in the mid size segment, the company’s market share has increased from 10% to 25%. In the superbikes category, Suzuki is able to compete against world players like Honda, Harley Davidson and Yamaha. If Suzuki can introduce 100 cc bikes for the mass volume segment, it will push up its sales fast. In the next fiscal year, Bajaj Auto and Hero Honda will produce around ten million bikes. But Suzuki has targeted to produce only half a million bikes during the same period.

Customer Service, Quality and Innovation Are the Keywords

Indian two wheeler market is worth ten million per annum. Out of this, 50% of the segment is dominated by the 100 cc bikes. In order to have a strong footprint in the Indian market, Suzuki has been focusing on product quality and customer service. It has been designing its bikes and cars keeping Indian conditions in mind. Suzuki hesitated to introduce its successful Alto car in India for many years. Finally it yielded. Alto car is doing very well now. Its core philosophy is to introduce value packed products that induce excitement in the minds of the people using them. Access-125 demands a waiting period of around four months for delivery. As long as the quality, innovation and customer service are maintained, Suzuki has a bright future in India.

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