Suzuki Is Living a Hard Life in China

The Japanese automaker Suzuki is having a hard life in China because of the difficulties in integration of its business there.

Partially due to the lack of determination and resolution to integrate its business in China, the senior executives of Suzuki didn’t give out any positive signals in its development in China.

Koji Tarumoto, general manager of Suzuki Motor (China) Investment Co., Ltd (Suzuki China), said: “Changhe Suzuki and Chang’an Suzuki both became the subsidiary companies of the new Chang’an Automotive Group. But we have never thought of integrating these two companies. Their distribution networks, however, will still be combined as one.”

Tarumoto also said: “Our next step is to manufacture cars with better quality and stronger appeal based on the existing facilities of the two companies. The total sales of the two companies will reach 500,000 units in the future.”

Tarumoto has put forward his own idea of developing Suzuki’s business in China. His words and opinions, however, may not cheer up the headquarters of Suzuki.

Frequent Changes of Leaders

Suzuki began to provide its technology for China from 1984. He founded Chang’an Suzuki and Changhe Suzuki respectively with Chang’an Auto and Changhe Auto – both are Chinese domestic automakers. After a short term of outstanding performances in China, Suzuki was surpassed by its peers from Japan, Volkswagen and so on at the end of the 20th century.

In 2007, Suzuki began to combine the distribution networks of its two joint venture companies in China, in order to regain the market share by improving sales and after-sale quality. According to the previous plan, Suzuki would combine the distribution networks the products from the two joint venture companies and the imported Suzuki cars to realize the sharing of models and after-sale service.

At that time, Fujio Masuzuka became the general manager of Suzuki China to take the responsibility of combining. However, due to the differentiated partnership and distributorship, Suzuki underwent a tough and thorny way of combination and failed to reach the goal. Fujio Masuzuka had to return to Japan ahead of the schedule due to his failure.

In the 2008 Beijing International Automotive Exhibition, Shunmyo Hashimoto took the general manager of Suzuki China. In his one-year tenure, Hashimoto made positive contributions to the cooperation in models between Changhe Suzuki and Chang’an Suzuki and the increase of Suzuki’s sales in China. However, few progresses were made in the combination of distribution networks.

In June 2009, Suzuki declared another change in its leading personnel in China. Tarumoto replaced Hashimoto. Tarumoto’s prime task was still the combination of the distribution networks, which was the same with Kashimoto’s and Masuzuka. Then, when Changhe Auto and Chang’an Auto merged into Chang’an Automotive Group, Suzuki required the integration of core businesses of production, sale and service to be placed at the precedent position of Suzuki China’s schedule.

Resistance of Distribution Combination

It has been 3 years since Suzuki put forward the plan of combining distribution networks but no solid achievements were gained. Someone attributed the failure to the “conflicts between Chinese and foreigners”, because Suzuki would dominate the two joint venture companies if the combination were done.

According to the journalist’s survey, the basic reason to the few gains of distribution combination is the incomplete cooperation. The distributors of Chang’an Suzuki and Changhe Suzuki always have conflicts between each other for the benefits and some other factors.

One distributor said that Chang’an Suzuki enjoyed a better fame in China. The medium- and high-end models – Swift and SX4 – are sold quite well in China. Therefore, the distributors of Chang’an Suzuki can earn good returns. But Changhe Suzuki focuses on the low-end autos, which are less popular in China. Therefore, the distributors of Chang’an Suzuki would not like to sell the cars of Changhe Suzuki, which may affect their benefits.

In addition, the distributors sharing the same of close locations may have to face homogeneous competition.

Take the two distributors in Shanghai for example. Yima Mingkang, a distributor of Chang’an Suzuki has his store located close to a distributor of Changhe Suzuki – Lianhai Auto. Previously, Yima Mingkang introduced the cars of Changhe Suzuki from Lianhai Auto. However, Lianhai Auto, with bigger scale and more capital, sell their cars at lower prices than Yima Mingkang. The distributor of Chang’an Suzuki, which has no advantages in price, was forced to stop selling Changhe Suzuki vehicles.

Due to aforementioned factors, the combination of the Suzuki’s distribution networks made little progress for the failure to trigger the enthusiasm of the distributors.

Recently, Suzuki declared that it will establish a direct store in China, aiming at improving the sales in China. Tarumoto said that no decisions were made on which cars will be sold in the direct store. “I hope every model of Suzuki can be included,” said Tarumoto.

New Partners May Come

As the distribution combination failed to gain satisfactory results, the merger of the core businesses of Chang’an Suzuki and Changhe Suzuki has been listed in the agenda of Suzuki China.

Last year, Changhe Auto merged with Chang’an Auto. Therefore, Suzuki’s Chinese partners turned from previous two automakers – Chang’an Auto and Changhe Auto – to one – Chang’an Group.

Compared with its partners, Suzuki’s “no opinions of the merger (of Chang’an Auto and Changhe Auto)” showed its tardiness in its development theory related with China.

Here are rumors saying that the combination of Chang’an Suzuki and Changhe Suzuki, if done, will leave a space for joint venture. Suzuki, which reached cooperation with Volkswagen, may begin to seek new partners in China.

During the Beijing International Automotive Exhibition (April 23 – May 2), Tarumoto said: “Presently we have no plan of seeking new partners in China. But I dare not say that no plans will be put forward in the future. It depends on our development in this country.”