As Shinzo Nakanishi takes over as managing director of Maruti Suzuki India Ltd Wednesday, which sells half the cars sold in the country, his task has been clearly defined by Osamu Suzuki, the chairman of the company’s Japanese parent: to defend Maruti’s 50% market share in Asia’s third largest automobile market, India. Forever. “We’re going to do everything we can to keep that level (50% share) for eternity,” Suzuki, who heads Suzuki Motor Co., said in Japan a few weeks ago.
Nakanishi, 60, who’s been the non-executive chairman of the company for five years, replaces Jagdish Khattar, a former bureaucrat who retires after eight years at the helm of the car maker. He will be the first Japanese national to be the managing director of the company, in which Suzuki Motor holds the majority stake. He will have a term of five years if his contract is continually renewed, because the retirement age at the firm is 65.
Nakanishi, who joined Suzuki Motor in 1971, has been associated with Maruti since the company was set up as a joint venture between the government of India and Suzuki in the early 1980s—in a market dominated by two car brands, Ambassador and Fiat. In the two decades that followed, Maruti revolutionized the concept of the small car, made both Fiat and Ambassador look outdated, acquired a dominant share in the market and set the stage for at least 15 new car makers, including Japanese rivals such as Honda Motor Co to enter the market.
Nakanishi also has the additional responsibility of overseeing Suzuki’s operations in India, China and West Asia as executive general manager of the overseas automobile marketing division of the Japanese car maker.
Nakanishi is no stranger to emerging markets. A board member of Suzuki Motor, he has overseen the company’s operations in markets such as Indonesia, Hungary, Pakistan and East Asia.
Still, his task here certainly doesn’t appear easy given the stated ambitions and plans of rival car makers, such as General Motors Corp. and Toyota Motor Co., which are several times Suzuki’s size. All of them have introduced or are drawing up plans to roll out small or compact cars—a category which accounts for 95% of the 50,000 cars Maruti sells on an average every month.
General Motors wants a 10% market share by 2010 and so does Toyota, while Hyundai wants 25%. If all these players achieve their targets, Maruti’s share may well shrink to less than 40%.
Add to this fray local players such as Bajaj Auto Ltd, a two-wheeler maker that has tied up with Renault SA and Nissan Motor Co. to make a $3000 (about Rs118,182) car and Tata Motors Ltd, India’s largest auto maker, which wants to make a car, half as expensive as Maruti’s cheapest car, the Maruti 800.
Nakanishi was not available for comment despite repeated requests for an interview. His compensation is also not known and a Maruti spokesperson said it “would be a board decision”.
Khattar was paid a salary of Rs2.1 crore a year, according to the lastest annual report of Maruti annual.
“It depends on the driver,” said Khattar when asked how Nakanishi should go about his job.
“He can take whatever way that suits him.”
To help things along, Maruti is investing around Rs10,000 crore in expanding production, and expects to make a million cars a year by the end of the decade. India’s car market is expected to touch 2.2 million units a year by 2010, according to the Society of Indian Automobile Manufacturers. The company is also building a research and development facility in India, second in size to its Japanese unit.
The company, which may introduce as many as eight models by 2010, is introducing two new cars next year—the sedan version of the Swift and a new car based on a concept model called A-star. It has also decided to launch a small car based on its Splash concept that was displayed at last year’s Paris auto show at an unspecified date.
Still, analysts believe that the going will be smooth for the company given the continuing growth in its bread and butter segment—the small and compact cars. Seventy seven of hundred cars sold in the country are from this category.
“We still are a price conscious people and the infrastructure and maintenance costs make us decide on small cars,” said Manish Mathur, principal at consulting firm AT Kearney & Co.
“They (Maruti) are the strongest player with multiple products which enables them to cast their net wider.”
In a nation where only seven of every 1,000 people own a car compared with 12 in neighbouring countries such as Pakistan and Sri Lanka, most first-time buyers go for small cars. Maruti sells five models in this category, including the Alto, the most popular car in the country. It also plans to double its distribution network to 1,000 by 2010 to expand its reach to smaller towns and cities.