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In autos: show, not tell

Amidst all the news and the speculations of the many new players entering the automotive market—from passenger cars
Updated 09 May 2017

Amidst all the news and the speculations of the many new players entering the automotive market—from passenger cars to commercial vehicles, from Renault to MAN to the probably-won’t-happen Audi, the market is, for lack of a better word, tickled. Besides, inducing competition into the auto industry and bringing better models and brands to the fore, seasoned players have started to show their cards. And Suzuki stepped forward first.

The company was the first of the three existing carmakers to present an investment plan to the government when the auto policy was launched, hoping to utilize concessions offered to new entrants. Alas, the government did not find it feasible to re-do a policy it took years to formulate, having thought long and hard about the implications to existing carmakers. That sizeable investment stood at $460 million which Suzuki has put aside for now.

But even without it, the new Cultus (1000cc), known as Celerio in Thailand, was just launched in two variants. Though the price is around 15 percent higher compared to old Cultus, New models like Suzuki Ciaz and Vitara are being imported experimenting into higher engine categories in competition with Honda and Corolla. A much smaller Alto-660 will also be coming which could potentially replace Mehran.

With all that going on, the Orange Cab scheme announced by the Punjab government (which is up for approval in the upcoming budget) for the youth could potentially add 100,000 cars to PSMC’s sales in the coming fiscal. The recent apparent fall in sales of Bolan and Ravi was because 50,000 cars were added to the company’s sales the previous year because of Punjab government’s Apni Rozgar Scheme. That scheme is coming back, only with double the quantity and Suzuki’s Mehran, Bolan and Wagon R are all playing.

The rise of ride-sharing apps in big cities has given a renewed appetite for smaller cars and WagonR is proving to be immensely popular, competing neck and neck with imported Daihatsu Mira and other smaller used imported cars. If sales are any indicator, the average sale for WagonR has almost doubled this fiscal year.

Judging by the car variety that could be entering the market, most players are focusing on higher engine compact cars, perhaps more sophisticated. The competition becomes fiercer in those models against Corolla and Honda. Suzuki for its part has always stayed above the fray, not having to deal with any particular brands fighting for Suzuki’s spot. Virtually no competition has existed for the cars Suzuki locally assembles.

The only competition it has seen perhaps has come from imported cars and it has been a tough one, but there is no denying that Suzuki enjoys a particular advantage over existing as well as upcoming players. It has a very large and unique market which clearly intends to capitalize on.

Though model replacements, higher imports due to introduction of new variants, and lower localization will be costly and could squeeze margins going forward, the new scheme coupled with prospective demand are raising expectations from Suzuki.

In any case, Suzuki is setting the stage, and others are following where Toyota announced a $40 million worth of investment and Honda is already launching different variants.

One can only hope that in the next 5 or so years, all this would materialize into better priced products for the consumers also; competitive perhaps with next-door neighbor India that sells similar cars at lower prices.

Copyright Business Recorder, 2017

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