New Rivals for India's Top Auto Spot

A new Japanese management team at Maruti Suzuki plans to keep its No. 1 place against rival Tata and other newcomers

by Nandini Lakshman

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For the first time ever, a team of Japanese executives is at the helm of India's top automaker. On Dec. 19, Shinzo Nakanishi took the reins as managing director of Maruti Suzuki India, a subsidiary of Suzuki Motor founded in 1982, that until last year was a joint venture between the Japanese automaker and the Indian government. Nakanishi has plenty of home-country company. The joint managing director, Hirofumi Nagao, and the heads of production, marketing, and research and development are all Japanese.

There's no reason to worry about the company's direction, according to Nakanishi. "Maruti Suzuki is doing very well," he says. "Sales, financials, customer satisfaction, everything is very impressive." Still, the signal behind the management shakeup is clear: As competition in the fast-growing Indian market heats up, Suzuki wants to show it can do better on its own than when it was tied to New Delhi-appointed officials.

On Nakanishi's agenda—big investments, new products, and expanded R&D. The goal is to retain the company's position as India's No.1 carmaker with a market share of more than 50%. "India is ready to play a bigger role in Suzuki's global operations," says Nakanishi. Of the 3 million cars Suzuki plans to sell worldwide by 2010, "almost 30% will have to come from India." So he's planning investments of $2.28 billion to expand and upgrade factories and strengthen distribution.

Battle for the Bottom Bar

Suzuki's new moves come in response to unprecedented competitive pressure from Ratan Tata, chairman of India's largest private sector conglomerate, Tata Group. His Tata Motors is set to display his most ambitious project—the much-awaited $2,500 'People's car' (BusinessWeek.com, 1/3/08)—at the Indian Auto Show in New Delhi this Thursday. The most skeptical among Tata's critics has been Suzuki's 77-year-old chairman Osamu Suzuki (BusinessWeek.com, 12/5/07), who has been making increasingly caustic comments about the price and quality of Tata's low-cost car, which no one has seen as yet.

Still,Suzuki is clearly taking the threat seriously. On Dec. 28 at the automaker's head office in Hamamatsu, Japan, Nakanishi hinted the company may cut the price of Maruti's base model, the $4,810 Maruti 800, currently the cheapest car in the world. Maruti also has a series of new products of its own to showcase in Delhi this week, a day before the Tata small car is unveiled. For instance, there's the new concept car, tentatively christened A-Star, powered by a 1 liter aluminum engine. Suzuki plans to export 100,000 units of the A-Star to Europe by the end of the year. Suzuki's not saying, but market analysts believe a new sedan, the Dezire, built on the successful Swift car model that will replace the Esteem, will also be on display.

Suzuki's India operations have reason to be confident. As of September, 2007, the company had its best half-yearly sales to date—336,000 vehicles—overtaking its Japanese parent, which sold 315,000 in the same period. The new goal: 1 million cars annually by 2010. The $2.28 billion investment will be used to upgrade manufacturing facilities in Manesar and Gurgaon in Haryana, northern India, and to build the company's first R&D facility in India—and the largest outside Japan—also in Haryana. This will enable Suzuki to start designing cars by 2010 in India for the European market. Already about 100 engineers from India have gone to Suzuki's Japanese headquarters for a two-year training program.