[shortbread]

Suzuki had a head-start in the Indian market having started car production in the 80s with the Indian Governments support. It never had to look back since and it's almost 2 decades before the compact car market that Maruti Suzuki monopolized saw any serious competition. Even today Suzuki is reaping the reward of its early entry and easily dominates the Indian car market. India consumes more Suzuki cars than rest of all it's markets combined and the very survival of Suzuki's car business depends on it's Indian operations, Period.

Yet, despite this countries importance in Suzuki's operations and profitability, not even 10% of its global sales are being exported from India, Why?

Suzuki have a very established supply chain, productivity and efficiency is unmatched, literally it's entire product portfolio is also produced in India. So why this step motherly treatment?

I can understand if they are pushing cars from japan considering it is Suzuki's home country, but No. Most Suzuki's produced in Japan are meant for domestic consumption. Suzuki exports far more cars from Hungary, Indonesia and Thailand than from India it's most important market.

What makes the likes of Hyundai and Ford far more capable of exporting cars from India despite running much smaller operations? Why can't Suzuki increase investments and employment in India by producing more cars destined for exports?

Suzuki aficionados at this point might question, why is this important at all when they are doing so well in India? Well it is vital for this country's economy, which also happens to be Suzuki's cash cow.

1. Considering Suzuki's dominance is only going to continue, isn't India losing new investments especially from carmakers who would otherwise look at India as a healthy production base as well?

2. Suzuki's early entry and following dominance means India's car market is literally halved for rest of the car makers, both Domestic and International. What this means is despite having a massive car market it is not viable for a dozen odd car makers to fight for the remaining market of about 100k cars a month.

3. What this also means is that if this market is not viable, car makers will question their presence in India and will start to quit the market. One recent example is GM India, which had healthy exports (70k Beats were exported annually) but quit the market as Indian sales were disappointing. How long before others follow suit?

4. Loss of car makers or flat-lining of production volumes simply mean lack of investments and job generation. Especially since these car makers are more likely to look at India as a global production base as well and not simply a domestic money printing business.

One can only rely on makers like Hyundai, Ford and domestic players like Tata and Mahindra to push for exports and hence help India's economy. Suzuki simply sees India as a cash cow and whatever exports that happen seem more like a token gesture.

It is time the Indian Government looks at Suzuki's operations and sees what the country gains in return for the fruits this company enjoys. I am perfectly happy with Suzuki continuing to dominate the Indian car market provided it also looks at India as an important export base as well.

Or all Suzuki's dominance will do is suffocate the Indian automotive Industry of investments and additional employment it desperately needs. If Suzuki can sell in India and help keep its International operations afloat, it can also 'Make in India' for it's International markets to consume.

[SchumiFan]

Suzuki accounts for 50% of all cars sold every month in India. Surely they are all manufactured here in India using Indian labor?

The rest of them simply can't sell enough cars and focus on exporting them to make their factories run. How is one model right and the other one at fault?

The Maruti Suzuki cars have a waiting period of weeks to months depending on the model and variant. Surely, they would like to reduce this before exporting more cars to other countries unlike Ford which was exporting cars while letting the indigenous customers wait for their prized possession (Ecosport)?

[Dry Ice]

I don't understand, how is Suzuki's success not helping the Indian economy in its present state? All their cars are being produced in-house either in Manesar or their Gujarat plant employing local populace.

Others export outside India merely to keep their plant utilisation meaningful. Without exports, the plants will shut down coz they don't do volumes justifying the setups.

[Chetan_Rao]

If I had to take issue with Suzuki, it would be more on the lines of them not offering their full complement of products in their largest market.

We don't get the best variants, and the ones we do are watered down on both quality and features.

Before someone points out the obvious, yes everyone else does it and our lax regulations are equally to blame, but I expect better from a company that claims this country comes home in their car(s).

[shortbread]

Originally Posted by Dry Ice

I don't understand, how is Suzuki's success not helping the Indian economy in its present state? All their cars are being produced in-house either in Manesar or their Gujrat plant employing local populace.

Originally Posted by SchumiFan

Suzuki accounts for 50% of all cars sold every month in India. Surely they are all manufactured here in India using Indian labor?

Suzuki isn't doing India any favors by producing for local consumption. If they cannot make and sell 1.5 million cars for Indians to buy there are half a dozen other manufacturers who can step in and do so. More than 90% of cars sold in India are made domestically irrespective of the manufacturer, so Suzuki is not doing us any major favors. If a company wants to be competitive in the domestic market, it has to make their cars in India. Or be slapped with massive import duties.

The question is how does in Indian automotive industry grow and contribute more to the domestic economy? Exports will play a major role in this.

The issue is Suzuki's early start and almost monopolistic hold of the domestic car market is choking the Indian car industry of vital investments and growth.

I am perfectly fine with Suzuki dominating the Indian car market, they have perfected the art of making, selling and servicing cars in India. What I want them to do is rather than produce more than 1.5 million cars in India annually from 3 factories employing 30k (predominantly contractors) people; I want to see Suzuki run four factories, employ 40k people, produce nearly 2 million cars and export a quarter of their production. Why not?

Suzuki Hungary exports more than 95% of its production abroad, generating more than 2 Billion Euros in export revenue for Hungary. Why cant Suzuki do that in India, a country that literally keeps its car business afloat.

The Government should put in new diktats pushing manufacturers to export more. There should be slabs based on domestic sales and manufacturers given an 18 month notice period before enacting them, for eg:

1. 5% mandatory exports from manufacturers producing and selling more than 10k cars a month.

2. 10% mandatory exports from manufacturers producing and selling more than 25k cars a month.

3. 25% mandatory exports from manufacturers producing and selling more than 100k cars a month.

Such a ruling will revitalize the domestic Car industry in a jiffy. Manufacturers like Suzuki who are in a comfort zone milking money from India will be pushed to invest into the domestic economy and employ thousands more.

[RajeevMD]

One of Maruti-Suzuki's prominent export markets happens to be Sri Lanka, but of late things are turning sour for MS here too.

The MS Alto 800, Alto K10, Wagon R, previous gen A-Star and the Celerio were quite a hit here given that they were very cheap compared to Japanese imported cars.

Come budget 2018 and the whole scenario changed. Sri Lanka changed its import duty valuation system. Till then it was based on CIF prices i.e. the import duty was a percentage of the car's CIF (Cost, Insurance, freight) quoted on arrival in the Letter of Credit. This system made Japanese cars costly since they cost higher than an Indian made car plus freight cost was higher. The government felt it was losing a lot of taxes on undervalued cars.

http://dailynews.lk/2017/11/16/busin...ve-perspective

Now the duty is calculated based on the engine capacity of the car in cubic centimeters.
In that case an Alto 800 would cost 800x 1750(<1000cc petrol car tax) = LKR 1.4 million import duty. Whereas a Japanese Kei car like Suzuki Wagon R with all the radar based safety systems, mild hybrid tech, airbag, ABS and ESP would cost 660x 1250 (<1000cc hybrid car tax) = LKR 825,000 import duty.

Now that Indian and Japanese cars are priced very close with some mildly used Japanese cars costing even less, people have totally abandoned Indian cars as of now.

Moreover w.e.f. 01.01.2018 Sri Lanka has banned imports of cars without airbags, ABS and seatbelts. This came as a further blow.

All I can make of the scenario is that MSIL isn't exporting much since their quality, safety standards and tech are below par when compared to Suzuki Japan and they need to make amends before its too late.

[arakhanna]

Originally Posted by shortbread

Suzuki isn't doing India any favors by producing for local consumption.

The Government should put in new diktats pushing manufacturers to export more. There should be slabs based on domestic sales and manufacturers given an 18 month notice period before enacting them, for eg:

1. 5% mandatory exports from manufacturers producing and selling more than 10k cars a month.

2. 10% mandatory exports from manufacturers producing and selling more than 25k cars a month.

3. 25% mandatory exports from manufacturers producing and selling more than 100k cars a month.

Such a ruling will revitalize the domestic Car industry in a jiffy. Manufacturers like Suzuki who are in a comfort zone milking money from India will be pushed to invest into the domestic economy and employ thousands more.

Why should any one be doing favors to anyone? We are a market oriented economy and hence should work as such.

Suzuki has built an admirable business in India and hence is reaping the rewards of the same. As long as there is no preferential treatment being provided to them then let the business dynamics flow. I remember few years back few at Dalal Street were writing epitaphs of Suzuki in India as the market was getting to be more premium and there were competitors galore. Now the pendulum has swung the other way as now the view is no one can touch Fortress Maruti.

If the management is astute and adroit and is able to handle the next transition to EV then kudos to them. Else we could see splintering of the marketshare going forward. Nonetheless the market should have a level playing field. Favoring no-one and discriminating against no-one.

As for the exports obligation, my view is that it should not be present. As much as India needs employment and industry, this is not the way to enhance the same. Economics should be the key driver. If it makes economic sense only then should companies export. The reason that auto exports from India have increased is due to lower cost manpower and and the development of a robust auto ancillary space.

Providing incentives for exports like SEZ, taxes rebate, labour laws relaxations etc is a better way to boost industry rather than setting obligations which would impact consumers in India with higher prices to fund the same.

[Hayek]

Incredible how one can come up with such statist ideas. Production for exports is economically no more or less beneficial than production for the domestic market. Both create jobs. If Suzuki chooses to produce locally in each of its major markets, that’s its prerogative. If Indian customers, rightly or wrongly, turn every model Suzuki launches ( no matter how unsafe) into a hit, that’s their prerogative. By the way, saying Suzuki Hungary exports is like saying Suzuki Haryana exports to the rest of India - the EU is a common market (with fewer tariff barriers than ore GST India) and countries are no different from our states from an economic perspective.

What we need in the auto industry is less government intervention, not more, except in the realm of safety and environmental standards.

We are now one of the world’s largest auto manufacturing nations - the infant industry argument that the industry needs protection through tariffs no longer holds. What we need to do is therefore reduce tariffs on car imports to 10% (which is the typical profit margin of auto manufacturers) in the next 2-3 years. This would give Indian customers greater choice, and lead to pressure on domestic car manufacturers to improve their efficiency.

So yes, we should stop doing Suzuki a favour by imposing tariffs which shift wealth from Indian consumers to Suzuki. But we should certainly not start forcing manufacturers to export.

[ashutoshb]

I see the thread title and the first thing which comes to my mind is, maybe their cars aren't fit enough for export.

Remember when Hyundai taunted Maruti for their build quality.

Maybe Maruti builds the cars fit for consumption in India and they aren't just worthy enough to be sold in markets with stricter safety norms. And making two versions of the same car might not be profitable enough.

I am waiting for Global NCAP to test Maruti's newer crop, like the Brezza, DZire and the Baleno. The results might prove my point.

[ajmat]

Originally Posted by shortbread

Yet, despite this countries importance in Suzuki's operations and profitability, not even 10% of its global sales are being exported from India, Why?
.

Simple - the indian market is sufficient in itself

How long before others follow suit?

When they start or continue to make lousy or outmoded cars (Nissan, Fiat, VW/Skoda are getting there unless they renew their range quickly) or they have no successor to their one product wonder (Renault, Honda)

What makes the likes of Hyundai and Ford far more capable of exporting cars from India despite running much smaller operations? Why can't Suzuki increase investments and employment in India by producing more cars destined for exports?

Hyundai have cut down exports with the opening/expansion of plans in Turkey and Eastern Europe. Ford only export the EcoSport and Figo in small numbers

Suzuki exports far more cars from Hungary, Indonesia and Thailand than from India it's most important market.

ASEAN / EU tariff exemptions drive these decisions

It is time the Indian Government looks at Suzuki's operations

Can you trust the goverment to make a good business decision?


What you do not realise are the huge amount of auto components exported from India

[damodar]

I don't know how much MARUTI earns in foreign exchange by exporting cars but here are some statistics of the royalty payments to parent SUZUKI Japan since 2009. The total comes to 19400cr!
http://www.moneycontrol.com/news/tec...15465.html/amp

[damager21]

Originally Posted by shortbread

Even today Suzuki is reaping the reward of its early entry and easily dominates the Indian car market.

Let's be fair to Maruti Suzuki here and agree that their dominance has nothing to do with government support that they received in 80s and hence the head start. There are enough and more businesses, there are enough and more products which were dominant once and no longer exist today. The fact that Maruti Suzuki is still a market leader after so many years is because of their strong focus on Indian consumers, their needs and wants. They understood the pulse of Indian customers and have continued to innovate and adapt themselves to changing consumer behavior like no other auto manufacturer and they are reaping the benefits of it

Originally Posted by shortbread

Yet, despite this countries importance in Suzuki's operations and profitability, not even 10% of its global sales are being exported from India, Why?

Suzuki have a very established supply chain, productivity and efficiency is unmatched, literally it's entire product portfolio is also produced in India. So why this step motherly treatment?

Imagine you have capacity to manufacture 100 cars and you currently have a order book to deliver 120 cars, what would you do? Would you keep existing Indian customers waiting and focus on exports or rather cater to the demand of Indian customers?

Like you rightly mentioned in the beginning, Maruti Suzuki is almost in a monopolistic situation in India. It will be suicidal for them to try and make more monies by focusing on exports at the cost of keep existing customers waiting. There are some really smart people in the board room taking these decisions and they are not gonna make this mistake

Originally Posted by shortbread

Suzuki aficionados at this point might question, why is this important at all when they are doing so well in India? Well it is vital for this country's economy, which also happens to be Suzuki's cash cow.

1. Considering Suzuki's dominance is only going to continue, isn't India losing new investments especially from carmakers who would otherwise look at India as a healthy production base as well?

Suzuki has its own plant in India and as we speaking they are ramping up production. They have generated employment for thousands of direct workers and also those working with ancillaries. They sell cars like hot cake and government gets tax from each sale. So in that sense it is definitely helping our economy.

Did you know that Suzuki is investing INR 1,151-cr in it's Gujarat plant to setup lithium-ion battery unit? Now this could be their effort to work towards government vision of moving towards electric vehicles in which case it is a great move. Or it could be used to export these batteries, which is also a good move

Expect them to invest more in India to increase their production capacity. Auto industry requires huge investments for plant setup. Remember what Tata did when they launched Nano? Setup a plant with huge capacity in Gujarat anticipating huge demand.

Originally Posted by shortbread

2. Suzuki's early entry and following dominance means India's car market is literally halved for rest of the car makers, both Domestic and International. What this means is despite having a massive car market it is not viable for a dozen odd car makers to fight for the remaining market of about 100k cars a month.

3. What this also means is that if this market is not viable, car makers will question their presence in India and will start to quit the market. One recent example is GM India, which had healthy exports (70k Beats were exported annually) but quit the market as Indian sales were disappointing. How long before others follow suit?

The only reason why other manufacturers have failed and Maruti Suzuki has succeeded is because Maruti has come up with the right products and resurrected itself. Did you ever see following chart?

It was not all hunky dory for Maruti Suzuki. Their market share was 38% in 2011-12. They have obviously fought it out hard to be at about 50% today. Launch of Nexa and well rounded products like Baleno and Vitara Brezza has turned around things for them.

The likes of Honda have never understood the Indian market. When diesel cars were required, they never launched one. By the time they launched one we started moving towards petrol. They focused on Amaze and Brio while Indian customers started aspiring for premium products. Their so called premium products are also half hearted attempt at making them available. Theses misses are bound to cost them and everyone else who is slow to react

[deehunk]

Originally Posted by damager21

Let's be fair to Maruti Suzuki here and agree that their dominance has nothing to do with government support that they received in the 80s and hence the head start. There are enough and more businesses, there are enough and more products which were dominant once and no longer exist today. The fact that Maruti Suzuki is still a market leader after so many years is because of their strong focus on Indian consumers, their needs and wants. There are some really smart people in the boardroom taking these decisions and they are not gonna make this mistake

The only reason why other manufacturers have failed and Maruti Suzuki has succeeded is because Maruti has come up with the right products and resurrected itself. Did you ever see the following chart?

It was not all hunky dory for Maruti Suzuki. Their market share was 38% in 2011-12. They have obviously fought it out hard to be at about 50% today. The launch of Nexa and well-rounded products like Baleno and Vitara Brezza has turned around things for them.

True, they have never shied to take help from their competitors like buying diesel engines from Fiat or the recent tie-up with Toyota with an eye on the electric car market.

[vb-saan]

Originally Posted by shortbread

Yet, despite this countries importance in Suzuki's operations and profitability, not even 10% of its global sales are being exported from India, Why?

Which is ok; they have huge waiting list for their popular models in the domestic market. I feel it’s the right approach to cater home business first and then look at exports.

Originally Posted by shortbread

Most Suzuki's produced in Japan are meant for domestic consumption. Suzuki exports far more cars from Hungary, Indonesia and Thailand than from India it's most important market.

This makes sense – firstly Suzuki is not the most important/dominant player in those markets and hence it’s good to use the facilities (and cheap labour) for export production. Secondly, the variants produced in these countries for local market probably have fewer variations than what they sell in export markets. For example the safety features in a top-variant Suzuki sold in India will be what you will see in the base variant of export markets. This actually is my only grouse on Suzuki India.

[Electromotive]

Originally Posted by shortbread

...

You have got cause and effect wrong. It is exactly because of govt. policies that the state of the market is what it is.

MSIL dominates and new competition falters because of 2 primary reasons:

1. Lack of consumer protection
Lack of consumer protection makes the consumer risk averse so they go with true and tested. This makes the market biased against new competition.

2. Unreasonable taxes on cars
The taxes the govt. charges doesn't seem to go towards either infrastructure or consumer protection. The poor infra causes greater wear and tear increasing maintenance costs. It is a double whammy for the manufacturer because the cars not only have to be cheap to compensate for the high taxes but also well built to survive Indian roads. This ensures that only those automakers that can command large volumes will survive. Hence the exit of GM and Ford and the shenanigans of Toyota.

MSIL commands 50% market share because it does right by the customer - provides reliable, fuss free cars at affordable prices and makes sure the customer's interests are protected (because the govt. won't).

So, instead of asking the govt. to police MSIL strategy, we should be asking the govt. for clear and properly enforced consumer protection, better infra and rationalized taxes. The free market dynamics will take care of the rest.