As Suzuki completes 40 years of setting up a joint venture in India, it is a good time to look back at its journey and also forward to the future of the passenger car industry. Right now, it remains the biggest automobile manufacturer in the country, with a commanding market share of over 44 percent. The Japanese company which has been unable to shed the old brand name, Maruti, could well continue in pole position if it can tackle the new challenges of the auto sector.
The story of its birth and growth in this country is itself remarkable and often told. But it bears repeating. Maruti was incorporated as a company by Sanjay Gandhi in June 1971. It was immediately given a contract by the government headed by his mother, the then Prime Minister Indira Gandhi, to manufacture an indigenous ‘people’s car’. Subsequently, the 1971 war and the 1975 Emergency brought Sanjay into politics and the Maruti car venture went on the back burner. It was only after his death in 1980 that the government revived the plan for making Maruti into a ‘people’s car’. The search for a foreign collaborator was entrusted to technocrat V Krishnamurthy.
He got a chilly response from nearly all global auto manufacturers, given the socialist underpinnings of the economy at the time and difficulties in working within the license raj system. Ultimately, it was the smallest car manufacturer in Japan, Suzuki, that decided to take a chance on a joint venture with the Indian Government. A Japanese business journalist told me that the auto industry in his country thought Osamu Suzuki was a madman for going to India and it confirmed his reputation as a maverick in the sector. Osamu, who was the son-in-law of the owner, was ultimately impressed by the presentations made by Krishnamurthy and RC Bhargava and tempted by the prospect of a huge virgin market. His gamble paid off as the government extended concessions liberally to the first modern passenger car manufacturer in 1982. Till then, Fiat in the avatar of Premier Automobiles and the old-fashioned Ambassador car of Hindustan Motors was ruling the roost. The Maruti Suzuki brand swept them away as the new people’s car captured the imagination of the public.
To put things in context, it must be recalled that Honda took another 15 years to come to India, Hyundai took 16 years, and Toyota another 17 years. The extreme caution displayed by these companies enabled Suzuki to have the first mover advantage in the Indian car market and dominate the arena ever since.
It must also be recalled that along with the car manufacturing venture, the indigenization drive pushed by successive governments ensured that licenses were rapidly issued for matching collaborations with auto ancillary makers. An entire ecosystem of the automobile industry was created with Maruti Suzuki as the hub.
It was this thriving automobile sector that became the template for other foreign car manufacturers which also brought in partner ancillary ventures. The government’s equity share in Suzuki was sold off in 2003, enabling the company to become a fully Japanese entity.
But the prolonged tie-up was not without its flaws. Passenger cars produced in this country were made without many of the safety features that were mandatory in other countries. Seat belts, for instance, became a regular accessory only when laws were changed to make them compulsory.
Even now, the industry, including market leader Suzuki, is trying to avoid installing airbags for all passengers, arguing speciously that it would unduly raise costs, especially for entry-level vehicles. If the government relaxes regulations on this issue, it would go against all global norms and indicate that human life is not being given the priority it deserves in this country.
As Suzuki celebrates its 40th anniversary in India, it also has to recognize the reality that the passenger car industry has entered a new era. If it wants to retain market leadership, it will have to change with the times. For instance, it has to adapt to the changed scenario in which Indian brands like the Mahindras and Tatas are surging ahead in terms of sales, especially in the SUV category. Suzuki remains the vehicle of choice for entry-level models and has recognized the needs of a price-sensitive emerging economy market over the years, but it now has to adapt to the changing consumer needs and trends.
One of these trends is the shift to electric vehicles. Though the numbers are still not large, it is clear that consumers are moving towards EVs aggressively. Both the Centre and states are pushing toward providing an enabling environment for EVs, especially the installation of charging stations. The Power Ministry has set a target of setting up one charging infrastructure per 25 km on the highways. But it has left it to the cities or state transport hubs to develop specific targets and plans for their urban areas. The Delhi Government has already announced that it will set up 18,000 charging points by 2024.
The changes in the Indian passenger car front, however, are only reflective of the altered global scenario. The international EV market was estimated at around $160 billion in 2020 and is projected to cross $800 billion by 2030.
Suzuki has signaled it will not be left behind by announcing an investment of Rs 30,000 crore in setting up an electric cell plant as well as a car manufacturing facility that will include EVs. The stakes are high for a company that accounts for nearly 50 percent of its global sales in India. No wonder the 92-year-old chairman, Osamu Suzuki, made sure to attend the milestone event where the announcement was made. Clearly, the Japanese company is trying to ensure it remains relevant in a post-fossil fuels scenario.
But what is most enduring about the Suzuki saga in this country is the fact that a relatively small company in global terms made a leap of faith to test the unknown waters of the Indian economy in the 1980s. Its enormous and surprising success in an environment where the industry was being stifled till then is as much a story of disruption as that of the unicorns of the contemporary era.
