#suzuki

When Volkswagen bought a 19.9 percent share in Suzuki, everybody in the know knew that a much bigger trade was going down. A trade of subcontinents. Suzuki owns nearly half of the market in India, where Volkswagen is a relative nobody. Suzuki is dabbling in China, where Volkswagen rules the roost.

Suzuki is to India what Volkswagen was to China. Earliest foreign entry into a huge an untapped car market. Like Volkswagen in China, Suzuki built a dominant position in India early on. Suzuki owns half of the Indian market. Unlike Volkswagen, two-thirds of Suzuki’s operating profit is estimated to come from India. Volkswagen lost their commanding share of China (and made it up with volume) when the market exploded, attracted competition, and overwhelmed VW’s capacities. A mistake Suzuki seeks to avoid.

Sometimes, strength is a weakness. Especially in currencies. The still surging Yen makes Japanese Exports expensive and unprofitable. Despite a lot of talk from their elected officials that the Yen is too high, manufacturers are thinking it will go higher. This could significantly alter the export-heavy Japanese industrial landscape. Case in point. Suzuki and a plot of land.

Suzuki has a little bit of a problem keeping up with the demand in the frisky Indian market. If you can’t deliver, you lose market share. Suzuki’s share of the Indian market already slipped below their usual 50 percent. And guess who’s giving Suzuki headaches? Tata.

Suzuki is hustling to avoid needing more help from partner Volkswagen. For instance in India, a market VW covets. Suzuki used to own more than half on the Indian market. In the recent months, that share slipped a bit. Not because customers in India don’t like Suzuki. Suzuki can’t keep up with the demand. Customers have to wait for months to get delivery of popular car models such as the Swift hatchback and the Swift Dzire sedan, reports The Nikkei [sub]. Suzuki is finally doing something about it.

Psssst! Want to buy Japanese car makers below book value? Now is the time. Spooked by the strong Japanese Yen, stocks of export-heavy Japanese automakers such as Toyota and Suzuki can be had for less than the assets on the books.

Running a multi-national car company the size of, say, General Motors, Ford or Toyota means having lean, efficient operations. In the SUV/light trucks segment, turning a profit is easy. Because of the inherent profitability of these products, your operations don’t need to be that efficient to turn a decent profit. Where you really need to concentrate on profits is the other end of the scale. The small car market. This is where raiding the parts bin, nicking a platform from another division and moving production to a low cost country are taken as read when producing a plan for your next small car. But what if you’re trying to break into a market where small cars need to be firmly in the “four figures” price bracket? Well, this is the problem that Volkswagen is having in India. Like China, every car maker wants a piece of this Asian Tiger Elephant, but Volkswagen just simply doesn’t have the presence there to make their cars profitably. Or do they?

Where would we be without our breakfast cereal, fresh from the Chinese rumor mill? Two days ago, we wrote that Suzuki, Volkswagen, and SAIC are rumored to be working on a three-way tie-up. “Not so,” says SAIC according to Gasgoo. They denied a rumor that was spread by the competition at Suzuki’s Chinese partner Changan Auto.

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 ….

“According to the Wolfsburg grapevine, the Volkswagen Group is set to increase its 19.9 percent share in Suzuki by ten percent annually over the next four to five years,” says Automobile Magazine in Ann Arbor, Michigan. And they immediately ask: “What for?” Right.

India is supposed to be the world’s next growth market. For one company, this is already more than true: For Japan’s Suzuki. The Maruti Suzuki joint venture owns more than 50 percent of India’s market. And soon, Suzuki will build more cars in India than back home in Japan.

Did we say that Japanese brands have to do something to stop the erosion of market share in China? Nissan took the advice and said today that they started construction of their second factory in China’s southern Guangdong Province. According to The Nikkei [sub], the factory will open in 2012 with an annual capacity of 240,000 vehicles.