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‘Rs1 lakh car is not where the market is’

‘Rs1 lakh car is not where the market is’
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First Published: Thu, Jan 10 2008. 12 01 AM IST

Plain speak: ‘We think about the Rs1 lakh car and wonder: Wow, impossible.’ (Photo: Ramesh Pathania/Mint)
Plain speak: ‘We think about the Rs1 lakh car and wonder: Wow, impossible.’ (Photo: Ramesh Pathania/Mint)
Updated: Thu, Jan 10 2008. 12 01 AM IST
No car company in India will be more vulnerable, at least on paper, if the Rs1 lakh car that Tata Motors Ltd unveils today becomes a runaway hit, than Maruti Suzuki India Ltd.
In some two decades that it has done business in India, Maruti has dramatically changed the landscape of the car business here. When it first entered the market in the 1980s, sceptics said it could never make a car for Indian roads in a market dominated by the iconic, larger and sturdier Ambassador. Maruti today sells one out of every two cars in India, in an annual market of at least a million cars. Part of its success story was driven by the introduction of India’s cheapest and smallest car, the 800, named after its engine capacity, the cheapest version of which now sells for a low Rs2 lakh. Low, that is, until Tata Motors’ car arrives in dealerships, some months into 2008.
Plain speak: ‘We think about the Rs1 lakh car and wonder: Wow, impossible.’ (Photo: Ramesh Pathania/Mint)
Today, Maruti finds itself a spectator, along with most other auto makers, waiting to see what Tata Motors will unveil and wondering how the so-called people’s car will actually fare.
On the eve of the unveiling of Tata’s people’s car, a combative Shinzo Nakanishi, managing director of Maruti Suzuki, talks about why Suzuki doesn’t think it can build a car that is viable—for the company as well as for Indian drivers—for Rs1 lakh. At the same time, he appeared to concede that he can’t keep his market share at 50%—a stated ambition of chairman Osama Suzuki. Edited excerpts:
You’ve just taken over and it’s been some time. What’s going to be your single biggest challenge as a managing director?
Our target is one million units per year by 2009, and we have already started the investment for the manufacturing this year. So, we should definitely achieve this volume by 2009. That is my first mission.
By 2009? Are you advancing your deadline by a year? Earlier, you had said 2010.
No, but 2009 is April 2009 to March 2010. Sometimes, I may say 2010. That is most important. And, some people say market share. Market share is dependent on industry volume. Suppose, I say one million. And the industry is two million. Then it’s 50%. But, if the industry grows to three million, this becomes 33% market share. I don’t do anything. My capacity is one million. But if the industry comes down to one million, then we are 100%.
A star is born: Maruti’s Shinzo Nakanishi with the firm’s concept car ‘A-Star’ in New Delhi on Wednesday. (Photo: Ramesh Pathania/Mint)
Does the one million also include export volumes?
That’s a good question. No, that’s domestic. I have to squeeze the dry towel. I have to tell the production people: With one million capacity, make 1.2 million.
On Tuesday, Bajaj Auto Ltd unveiled its small car plans. On Thursday, Tata Motors is going to reveal its small car. Do you think it’s realistic to expect that you can hold on to a 50% market share?
No, no, this 50% does not count the Rs1 lakh car.
Why do you say that, surely that’s a car, too?
I don’t know, you know. When it arrives, at that time… Maybe after we see the launch of the Rs1 lakh car, then we have to modify our target for market share. I don’t know.
So, are you saying that with the introduction of the Tata car, you won’t be able to defend your 50% market share?
The two million (market share projection) is without the Tata (Rs1 lakh) car. If that counts, we won’t be able to do it (defend the market share). That’s natural.
Do you still want to be the king of small cars in the country, that being your strength?
I love these words: Small car for big future.
You know, Suzuki is a so-called small car manufacturer. This is good, but, you know, in some sense, it’s not good, because we didn’t have big cars. We have expertise in so-called small car manufacturing. And, the international trend is small cars. Especially in Europe. Except the US. Therefore, in those circumstances, to keep the small car manufacturing, and to keep it at a certain level…that’s good, and the small car has a big future. So, we should constantly focus on it.
But, if you look at the last two major product introductions from Maruti, they have been the Swift and the SX4, which have been more towards the mid-size segment. And, now, you are looking at a sedan version of the Swift. So, are we seeing Maruti’s focus slightly shifting from the small to the mid-size segment?
No, no, not shifting. Suzuki is not shifting. Maruti Suzuki is not shifting. It’s expanding. Expanding to make bigger cars. Generally speaking, because of their lifestyle, because of the circumstances, because of the environment, people want to move and upgrade. See, 800, when we introduced it, this was really, really the main model. However, now we have 10 models. Now what’s the main model? Alto, not 800. That means...just upgraded. So, we have to supply for those people who can upgrade. So, maybe if there will, I don’t know, be a shift or move to the Swift, we have to prepare and shift. And if Swift moves to the SX4, we have to prepare. That is our strategy.
Even when it comes to new product development, the last four releases from Suzuki have been so-called world cars, meant for the global market. Going forward, what is going to be the focus of product development?
Suzuki’s focus on the small car is not changing. Of course, we cannot ignore the US market. Therefore, we should develop some big car in Suzuki’s full bench in order to meet the US market. That is not for other countries. The US is an exceptional market. In Japan, we are keeping the mini-car segment. So, we have to focus on the mini-car in Japan.
Other than Japan and the US, we focus on the small car. But, in the small car, the lifestyle is changing. So, first we showed our sportiness—Swift and SX4. Next, we showed the Flash. More family. A-Star also more family. Now, sporty and family. Next, I don’t know—designer?
So, are you going back to the basics when you say family car?
No. The customer has a variety of lifestyles. People who like the sportiness: young, we have a menu for you—Swift. I want a slightly bigger car, but I like sporty. SX4. But I have a family, and I have no interest in sportiness. More family oriented. So, there are many varieties. Therefore, if there’s someone (who says) I don’t like the sporty, I don’t like the family, then what do you like? If this makes a big segment, we have to focus and develop there.
So, do you see some segment like that emerging in India? Or even worldwide?
I don’t know. But, I think you want me to say something about the Rs1 lakh car, I see. Suzuki cannot (make Rs1 lakh car). It’s not possible. For example, this one here (points to recorder) to remove some functions...that is possible. But, the Japanese market doesn’t allow it. To remove all the functions makes it cheap. However, that is not where the market is.
But, you’re the masters of frugal engineering, selling cheap cars and making good profits too...
Even the master, even the professor, it’s not possible. To meet emissions, to meet fuel efficiency, to meet the safety: impossible.
But, you made a Maruti 800, suppose you can develop a new car that meets the necessary emissions and safety standards for the country….
Yeah, possible, but with cost. We can, but with cost. It doesn’t make sense. We think about this and wonder: Wow, impossible.
So how cheap can you make it?
Rs2 lakh. The 800. This is a fact.
You’re setting up an R&D centre in India, and had earlier said that it would almost match Japan’s. So, do you think that Indian engineering in automobiles now meets those standards of Japanese excellence, or do you think there’s a long way to go, and it’s a long-term project?
Our aim is to reach Japan’s level in the area of facilities, hardware, and in the area of software. Right now, frankly, it hasn’t been reached yet. But our engineers have high capability. So, now, any minor changes they can do by themselves. The next step is a full body change. When? That’s the question. And to do so, we should (have) all the facilities—crash test, or road test, or dynamo—every facility the same as Japan, we want to invest for that.
When do we see that happening? Over how long a period of time?
Mid- to long-term.
That’s very vague… Does that mean three years? Five years?
No, no. Right now, Maruti’s engineers are 300-400. With this number, we cannot (do things independently). So, I said we should increase (the manpower) till we have 1,000. Or 1,500. To progress more, to reach the final target, we will need manpower. So we have four Cs: Capital, Character, Capability and one more—Commodities. So, when we put the 4 Cs, then we’ll see this happen.
What did you mean when you said earlier that Maruti was going to take a greater role in Suzuki’s global operations?
Suzuki announced that by 2009 fiscal year, it will three million (vehicle production). So, one million of global production is taken by Maruti. That’s 33%—a big role in terms of volume. In terms of sales also: right now, we are ¥3.1 trillion. Out of that, ¥0.4 trillion is from India. Over 10%.
Pranav Verma contributed to this story.
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First Published: Thu, Jan 10 2008. 12 01 AM IST