As a car brand, Suzuki is not one of the big beasts of the auto industry. It’s something of a niche player but is now planning to cement its position in key niches, says Dave Leggett.
When you hear the name Suzuki, what springs to mind? Reflect for a moment and a few disparate images appear. There are the motorcycles, of course. Then there’s the heavy presence in diminutive vehicles, like the kei-class Cappuccino roadster (fun if you could actually fit into it) that was even sold in the UK for a short while. Suzuki is an acknowledged industry specialist at making very robust small vehicles, like the Alto (doffs cap to the now finished Maruti 800, India’s Beetle). Let’s not forget the shake-rattle-and-roll Supercarry microvans that were ripped off to become the ubiquitous and crude taxis in China in the early 90s. And then there are also the small SUVs that eventually established Suzuki as a credible SUV player in the 1980s (SJ ‘rollover’ fuss notwithstanding).
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That small car expertise has also helped to give the company a very interesting geographical footprint, leading the market in India. The product niches, the expertise in small vehicles and the considerable presence in Asia were what probably brought the company to the attention of Volkswagen executives a few years ago. However, what began as an agreement to have an alliance, cross shareholdings and the capability to share manufacturing capacity and technology for mutual benefit, fell apart over perceptions that the giant player in Wolfsburg was taking the small player from Hamamatsu a little bit for granted. It was an acrimonious falling out.
So, in 2015, where does that leave Suzuki? It is – alongside Mazda, Mitsubishi and Subaru – one of the second tier Japanese automotive OEMs. As such, it has to focus very clearly on its competitive strengths to be profitable. Small cars are clearly one big strength and they tend to do well in emerging markets, so expanding and consolidating in emerging markets, like India, is also vital. Low margins mean that high volume is key and there have been some challenges on that front lately. At home, the Japanese government has concluded that tax breaks for kei-cars sold in Japan have acted to dampen enthusiasm for international strategies in some companies and the tax breaks for kei cars that have benefited manufacturers for decades are being reduced. That’s not good news for Suzuki. Suzuki has also had to ride the problems being experienced in the Indian economy and automotive market in recent years.
However, there are some positives at work for Suzuki. After a bad spell, India’s economy and automotive market is now recovering. Suzuki is very well placed to benefit from India’s very positive long-term car market prospects. There are also some big currency gains for Suzuki right now as the weak yen boosts profitability on international operations. Working with Fiat in the recent past (SX4/Sedici joint development as well as engine sourcing cooperation) has also been a positive, with the possibility of wider collaboration in the future, though FCA is also working with Mazda. One thing’s for sure: post-VW Group acrimony, Sergio Marchionne would tread very carefully there, although he’s bound to be very interested in the potential FCA benefits that could be levered off Suzuki’s deep India presence.
Another big positive for Suzuki is know-how on 4WD technology and SUV design. Suzuki company executives talk of the company’s strong SUV DNA and heritage (and rightly so; the DNA can be traced back to the 1968 Jimny). The company has looked at segmentation trends and decided that it needs to join the compact SUV/crossover party with a new model. It’s a burgeoning part of the global car market with vehicles like the Nissan Juke, Ford EcoSport, Fiat 500X and Renault Captur. Surely, Suzuki, with its small car and 4WD expertise, is well-placed to join this particular fray? Step forward a new Suzuki compact SUV. Not only that, but it reprises the Vitara model name (the ladder-framed Grand Vitara was a different animal). The first generation Vitara came along in 1988, which is a long time ago now.
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By GlobalDataThis new Vitara has much smaller dimensions than the outgoing Grand Vitara and Suzuki says the new compact model “meets contemporary needs” while also incorporating Suzuki’s ‘ALLGRIP’ four-wheel-drive system and advanced safety and connectivity equipment. Suzuki says the trim and colour options enable owners to express themselves by personalising its design. Yes, very contemporary. Come and configure. Customers can choose from 10 body colour possibilities that include two new colours as well as five two tone combinations. The two new colours are Atlantis Turquoise Pearl Metallic and Horizon Orange Metallic. Those two colours both looked good – but especially the blue – in the strengthening late winter sun while driving Vitara along the Atlantic coast near Lisbon earlier this week. Suzuki even laid on some off-road fun to prove that it can go off-road. Yes, it will be fine on pot-holed British roads.
The new Vitara went into production at the Magyar Suzuki plant in Hungary earlier this year and is currently making its market debut across Europe with UK sales commencing in April. It will later be exported around the world as Suzuki’s global compact SUV.
How much of the Suzuki SUV DNA is retained and embodied in this new compact SUV? Well, there is a pretty sophisticated 4WD system. The ALLGRIP system has four driver-selectable modes that is enhanced by a feed function to send more torque to the rear wheels if it detects wheel spin at the front. The new feed forward function gives the system the additional ability to predict front wheel spin risks from the road surface condition, accelerator pedal position, and steering angle and then send more torque to the rear wheels before wheel spin occurs, Suzuki says. There’s ‘hill hold’ and ‘hill descent’ control, too. Off-road boxes ticked, to a degree. This is, fundamentally, a car that feels like a crossover, though. Nothing wrong with that.
Two engines are offered – a 1.6-litre gasoline and a 1.6-litre diesel. The diesel comes with EGR (Exhaust Gas Recirculation) and VGT (Variable Geometry Turbocharger) for added efficiency and torque. Two-wheel-drive versus four-wheel-drive share of sales? UK sales manager Dale Wyatt reckoned that Suzuki would be over 25% 4WD sales versus a segment average of well under 20%. He’s looking for 6,000 sales of the Vitara in the UK this year, moving up to a potential 10,000 units a year. He sees Vitara as a conquest model for the brand, a crossover that will have wide appeal. With an entry level price of GBP14,000, it looks competitively priced and should do well. The crossover styling was well received by journalists on the launch, as was the overall spec and packaging. There are also some sophisticated driver assistance systems available on some model variants, including radar brake support and adaptive cruise control. The use of high tensile steel for the body has kept weight down (106g/km average CO2 for the 2WD petrol and 111g/km CO2 for the 4WD diesel).
Overall, it’s a very good car that is competitively priced. The volume targets are not huge and look eminently achievable. There should be room enough for Suzuki to enjoy very comfortable sales in what is a growing segment across the world. Suzuki says it can continue its aggressive new product strategy (at least one new model a year – this year has also seen the Celerio launched) and points out that it made 3m vehicles in 2014, its highest annual total ever. That makes it number nine in the world automotive OEM rankings on volume.
The Vitara is described as a flagship and it certainly is a very important model for Suzuki. It takes the brand into a very vibrant segment and one that promises much higher margins than kei-cars or Alto-sized models in India can ever deliver.
The trick for Suzuki will be to move the average margin per vehicle up as overall volumes rise across the world. Vitara (and the models that follow – look out for a concept in Geneva that will make it to production) will be at the heart of that calculation when the sales and revenue numbers are crunched back at base over the next five years. If Suzuki can crack that, it will look less vulnerable to eventually fading away on others’ terms in any industrial consolidation that lies ahead. There are many scenarios on what could happen to Suzuki and the other smaller Japanese OEMs that have confounded the scale-is-all sceptics to stay in business. For now, Suzuki can enjoy its independence, take satisfaction in its ability to turn out competent new product that plays to established brand strengths and remind itself of one very important fact: euros and pounds (especially pounds) convert into plenty of yen.
