Global Economics

Suzuki Chief Rips Rival's India Plans


Chairman Osamu Suzuki questions whether Tata's $3,000 car can meet standards, vowing to keep his Maruti brand working on more profitable models

Suzuki Motor's 77-year-old chairman Osamu Suzuki was in great form Dec. 5 at a press lunch in Tokyo. Despite his years, Suzuki was as impish as ever, sarcastically thanking reporters (including this one) for advice, scalding the company's new India chief Shinzo Nakanishi for even contemplating a share of less than 50% in that country's fast-growing auto market, and promising that he'll still be leading the Japanese automaker in another 10 years time.

Perhaps of most interest, though, is Suzuki's lukewarm view on plans for a $3,000 car for India. While Indian automaker Tata Motors is expected to unveil its long-awaited cheap car in January and Carlos Ghosn's Nissan (NSANY)-Renault alliance is promising something similar in the near future, Suzuki gave few hints that he wanted to enter the fray and appeared to cast doubt on whether a $3,000 car is possible (BusinessWeek, 8/24/07). "There is a slight lack of clarity about this $3,000 figure. Does it refer to the actual retail price? Or does it refer to the cost of materials that are used in preparing this automobile? It's not quite clear," he told reporters.

He also raised doubts over safety and environmental performance in such a cheap vehicle. "There's [also] not much clarity about which standards, and [by] which year, this $3,000 car is aiming to fulfill," he said. "Will airbags be included? Will seatbelts?"

Focusing on Meeting Stricter Emissions Standards

Suzuki added that the Japanese automaker is working towards meeting stricter emissions standards around the world, something seemingly impossible for an ultra-cheap car to achieve. "Right now, in Europe we have the Euro3 standards, and soon we will have the Euro4 standards and around 2013 the Euro5 standards will also be implemented. Are [Tata] only planning to release it domestically in India? Are they thinking of exports? There is so much that is not known about this car."

Of course, given the amount of attention that Nissan and Tata are getting for the cheap car, critics might argue Suzuki's remarks smack of sour grapes. After all, Suzuki, which controls 55% of the Indian auto market through its Suzuki Maruti subsidiary, has plenty to lose as local firms like Tata step on the gas and newer foreign rivals like Nissan look to build capacity. Nakanishi, who is Suzuki Maruti's first Japanese chief, sat beside the chairman at today's press conference and admitted that "holding this share will be very difficult."

Yet Suzuki's words bear serious consideration. For one thing, having led the company into the India market over two decades ago, few auto execs know the India market better (BusinessWeek, 9/28/07) than Osamu Suzuki, who took the name Suzuki after marrying into the automaker's founding family.

Taking the Lead in Econoboxes

And perhaps even fewer car companies globally know more about making small cars cheaply—albeit not $3,000 cheap—while turning a profit. It's worth recalling that in Japan, it's Suzuki and Toyota (TM) subsidiary Daihatsu that lead in making safe, well-equipped and profitable 660cc econoboxes. Today, such cars account for around a third of the total market, but rather than looking to make even smaller models, these days Suzuki is focusing on more profitable larger vehicles, such as models based on its Kizashi concepts shown earlier this year at the Frankfurt and Tokyo auto shows (BusinessWeek, 10/7/07).

While those models don't appear destined for India, Suzuki is keen to offer more models for those graduating from its entry-level Marutis to something a little more expensive—and much more profitable than a $3,000 auto. "Our fundamental stance is that rather than Suzuki becoming very concerned about watching over our shoulder to see what other people are doing, we'll move forward at our own pace," Suzuki added, doing an excellent impression of someone completely unworried by rivals' plans. By the sounds of it, Suzuki has no plans to change speed and make a $3,000 auto.

Rowley is a correspondent in BusinessWeek's Tokyo bureau.

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