Japanese carmakers look beyond slowdown, commit huge investments to Indian market

Dec 02 2013, 08:20 IST
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SummaryThe domestic car market may be in the slow lane for over two years now...

The domestic car market may be in the slow lane for over two years now, but that has not altered the flow of fresh investments from Japanese car makers that have placed their bets for a long term. Even as most global rivals tighten their purses, companies like Maruti Suzuki, Honda, Nissan and Isuzu have together committed investments of about R25,000 crore in fresh capacity additions and domestic R&D over the next 4-5 years, while Toyota, the world’s largest car maker, has recently completed an expansion of its production unit near Bangalore.

The optimism shown by Japanese car makers is not surprising, say industry insiders. Compared to rivals from Europe and America, Japanese car makers have traditionally been most successful in India, starting with Maruti Suzuki in the late 1980s which heralded the beginning of the modern Indian car industry. The success of Japanese players has been attributed to the Indian buyers’ preference for compact, fuel-efficient, high quality yet low-priced vehicles — something that Japanese car companies are experts in.

Today, the four Japanese players — Maruti Suzuki, Toyota Kirloskar, Honda and Nissan, together, command 52% share of India’s 27 lakh units passenger vehicle (PV) market. The lion’s share of 40% is with car market leader Maruti Suzuki, which offers up to seven small cars — the small car segment is the bulk of the domestic market with a 54% share of total PV sales. Honda’s recent success with its first diesel model Amaze has seen its market share climb to 5% by October this fiscal from about 3% a year ago, while Toyota’s lead in the MPV market with the Innova has helped it maintain around 5.5% market share. Nissan, which is currently building its local portfolio, hopes to gain significant market share when it launches its low-cost mass brand ‘Datsun’ in January, while SUV maker Isuzu has just started domestic operations with initial sales limited to South India.

Maruti’s tremendous success in India has encouraged its parent Suzuki to use it as an export base and product development centre for most emerging markets like Africa, South America and Southeast Asia, with a free hand to set up overseas assembly operations, if necessary. The reason for this division of responsibilities is clear — Maruti today accounts for about 40% of Suzuki’s global sales and around 25% of its profits. Huge investments are now in order as Maruti, which has an

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