Volkswagen, Suzuki, SAIC In Three-Way Talks

We’ve always suspected that there’s something bigger driving the (well..) tie-up between Volkswagen and Suzuki than little cars: Big markets. Volkswagen holds the keys to China, where they rule the roost, whatever numbers GM may conjure-up. Suzuki is nobody in China. Suzuki holds the keys to India. Volkswagen is nobody in India. It’s the perfect marriage. Even more perfect with some Chinese help ….

Short-term, Suzuki has more to gain, which is always nice when you romance a new bride. Volkswagen sold nearly a million cars in China in the first six months. By 2013/2014, they want to sell three million cars a year in China, not a pipe dream at all.

The whole Indian market amounted to 1.43m units last year, but Maruti-Suzuki owns more than half of that – not a bad dowry at all. Suzuki knows that they will not be able to hold that dominant market share over the long term, a lesson Volkswagen had to learn in China. VW once owned half of the Chinese market. They had to give up share as other players entered. But it’s easier to give up a little share in a growing market and make it up with volume than fight the uphill battle of the latecomers. Also, in the long run, a more mature Indian market will need a player that can serve all segments.

What’s more, Suzuki can use a little moxie: Suzuki just announced that Maruiti-Suzuki’s net profit shrank for the first time in five quarters in the April-June period, down 20 percent year on year, as The Nikkei [sub] heard.

We had our suspicions that Volkswagen would throw Suzuki a piece of their Chinese pie in exchange for Indian favors. And so it happens. Suzuki Motor is in talks with Volkswagen and their Chinese joint venture partner SAIC to set up a three-way joint venture in China “on the basis of the Shanghai Volkswagen Co”, says Gasgoo. Their source? “A top executive from Suzuki’s Chinese partner, Changan Auto.” Of course they would rat on their Japanese bride if she has a fling with two other guys.

There have been other suspicious moves. In March, Suzuki China relocated its 15-year-old office in Beijing to Shanghai’s Anting town, a stone throw away from SAIC and Shanghai Volkswagen. That happened right after Volkswagen announced that it would pay $2.5b for a 19.9 percent stake in Suzuki.

As for the rest, no reason to speculate. A similar announcement from India is probably not too far away. It wouldn’t surprise us if SAIC will play some part in that also. The Chinese have their eyes on the Indian market, but they need partners to get in, as demonstrated with the GM-SAIC India deal. Except that a Suzuki-Volkswagen deal could be much bigger than selling a few vans to the Indians.

Well, a Japanese-Chinese-German liaison should get interesting. Especially, when they all show up in India.