Suzuki withdraws from China, the battlefield for local brands is not just small-displacement cars

According to Nikkei News, Suzuki Motor has reached an agreement with Chongqing Changan to transfer its shares in Changan Suzuki to the latter and allow Changan Suzuki to produce Suzuki-branded cars under OEM for a period of time.

It is said that the plan is currently under review by relevant departments and a series of agreements are expected to be completed by the end of 2018.

China is a super car market with annual sales of 30 million vehicles, which is larger than the total sales of the second to fifth markets. In this market, small-displacement cars with a displacement of 1.6L or less account for more than 65% of the market.

Once Suzuki decides to withdraw from the Chinese market this time, it can basically be regarded as saying goodbye to the Chinese market forever, because this move will greatly damage the interests of its consumers, dealers and partner China Changan in China, and will bring huge negative damage to its brand image.

On the day the news broke, Suzuki Motor's share price in Tokyo fell 4.8%.

In the second quarter of 2018, Suzuki Motor's profit margin reached 11.8%, surpassing BMW's 11.4%, making it the world's most profitable automaker.

From 2011 to 2016, except for a brief year-on-year growth in 2014, Changan Suzuki's sales have been falling. Frustrated, Suzuki considered pulling out of this painful quagmire. Changan Suzuki's model introduction speed and product planning began to suffer a heavy blow.

Changan believes that it should cater to Chinese consumers' love for SUVs and the trend of consumer upgrading by launching more SUVs and larger models. However, as one of the most competitive small car manufacturers in the world, why would Suzuki change its company positioning just for the Chinese market with sales of less than 200,000 vehicles? It is impossible for Suzuki to develop medium and large models for the Chinese market alone. Such a move is irrational from the perspectives of R&D, manufacturing and marketing.

In 2017, Changan Suzuki's sales fell to 86,000 vehicles. From January to June 2018, this car company with a glorious past sold 23,062 vehicles, a year-on-year drop of 46.5%.

As the world's largest automobile market, China's sales data during this period was 18,000 vehicles, a year-on-year decrease of 37.3%, contributing 2% of Suzuki's global sales. As the world's largest market and the largest small car market, China should have become Suzuki's most promising emerging market. However, this did not happen, which is related to the automaker's market positioning.

In the economy and small car market where Suzuki excels, all Chinese independent brands have stockpiled it. They can only enter from the low-end car market and gradually develop upwards.

In the first half of 2018, Geely Automobile sold 767,000 vehicles with a turnover of 52.8 billion yuan and an average selling price of about 70,000 yuan. Changan, Great Wall, Chery, Baojun and other local independent brands have accumulated a large number of highly competitive models in the market segment where Suzuki Automobile is located.

Suzuki certainly will not change its market positioning for the Chinese market and switch to making mid-size cars, as this would lead to an even more awful failure. In fact, Changan Suzuki once launched a compact SUV, the Changan Suzuki Vitara. Unfortunately, it entered the most competitive market segment of Chinese independent brand SUVs, including the Harvard H6, GAC Trumpchi GS4, and Changan CS 55, and was basically beaten to a pulp in the market.

The Chinese cannot expect that Suzuki's automotive R&D focus will be in China. The most realistic idea is that the focus of Suzuki's model R&D, manufacturing, and supply chain is in India.

Suzuki's withdrawal from the Chinese market marks a strategic victory for China's domestic independent brands in the important market segment of economy cars.

Starting from this point, Chinese local brands will gradually expand the battle to higher-priced market segments, such as compact cars, mid-size cars, etc.

In this process, weak joint venture brands that originally had weak brand power in China, insufficient sales scale, and insufficient industrial chain will become cannon fodder in the "upward war" of China's local independent brands.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.