Chinese burn

SUZUKI says its brand status will move significantly upmarket after the introduction of the Japanese maker’s first mid-sized sedan and new brand flagship, the all-new Kizashi, but admits it will not be immune from the effects of an imminent influx of bargain-basement small cars from China.

Speaking to GoAuto at this week’s Kizashi launch, Suzuki Australia general manager Tony Devers labelled as arrogant any brand that believed its small-car sales would not be impacted by the range of Chinese cars due to be imported from later this year.

The outspoken Suzuki chief predicted it could take as little as three years for Chinese brands like Chery, Great Wall, Geely or Lifan – all of which have committed to releasing small passenger cars here in 2010 – to become established mainstream brands in the Australian new-car market.

Like many, Mr Devers believes Chinese car-makers, which have been tipped to attract up to 100,000 Australian buyers or 10 per cent of the local market within a few years, will develop their vehicles more quickly than Korean brands such as Hyundai, whose vehicle range experienced a 39 per cent sales surge when most other brands went backwards last year and is 65 per cent up so far in 2010.

Left: Suzuki Australia general manager Tony Devers. Below: Suzuki Alto



“The Chinese are coming, there’s no doubt about that – and they’ll probably do it quicker than the Koreans,” he said. “Hyundai is there now but it’s taken them 20 years to get there. I think the Chinese will do it a lot quicker.

“Let’s say in three year's time they get to a two per cent market share. Once you’ve got the base you can move to five per cent market share very quickly if the cars are right – and I think they will be right because they know what’s needed now as well.

“They will bring in products that in three years’ time I think will be very acceptable. With growth in the Australian market they’re going to get a share. It will take them three to five years for it to be a substantial share, but they’ll get there.

“Over the last 10 years or so legislation has made all cars reasonably safe. With legislation and their pace of development, there’s really nothing that’s going to put obstacles in front of them.”

Mr Devers concedes Suzuki is one of many brands – Japanese or otherwise – in the direct firing line of Chinese brands.

“There will be growth in the market we’ll get back to over a million cars (sold annually in Australia), but of course there are going to be some losers,” he said. “I’d love to say that we’re going to be one of the marques that grow, but it’s going to be very difficult with more players.

“Look at Volvo, Saab, the Malaysians, who really haven’t made a mark yet. Look at the local manufacturers, who now represent only 16 per cent of the total sales in Australia and they’re dropping. Holden is at 13 per cent, Ford is at eight per cent and Hyundai and Mazda are knocking on their door.”

Mr Devers said he expected Chinese vehicle dealerships to become profitable after establishing themselves alongside existing brands in the marketplace.

“It’s like somebody who buys a pub goes broke. The guy who buys it off him does better, but it’s the third guy who makes all the money. I see car dealerships as very similar.

“The Chinese dealerships will be a hang-on to major franchises initially, then they’ll evolve and in three to five years they’ll be very acceptable.”

However, despite being a small-car specialist, Mr Devers says Suzuki is better armed than many brands to deal with the Chinese assault on the bottom-end of most vehicle sales segments.

Asked if Suzuki was among the most vulnerable for attack by new Chinese brands in Australia, he said: “Not really. We’ve got Grand Vitara as well and we’re 30 per cent up with that since the new model.

“Suzuki has always been financially successful. We’re the only car-maker to be in profit for 60 years straight. We have a base with motorcycles and the core platform in India really gives an advantage.

“Indian sales are up 20 per cent so far this year – on top of being 20 per cent up last year during the GFC.

“We’ve got a 54 per cent market share of a 1.6 million-car market and everybody’s in there, including GM, Ford, Toyota and Hyundai, which will also soon bring stuff out of India to Australia like the i20.

“So even if we drop down to below 50 per cent, that market in India will go from 1.6 million last year to about four million cars in 2014.

“We’ve increased our sales here in Australia by more than 200 per cent in the last three years.

“I think we’ve changed the brand. When I first joined Suzuki the brand was seen as small cars only – very feminine – but we’ve used the rally image of the Swift to change the brand considerably and that’s exactly what Kizashi will do for us as well.

“It will bring people into the showrooms who’ve never considered Suzuki before.

“Our research shows us most of those households have a least three cars in the garage – one might be a small car like a Swift for the youngster, another might be a mid-size prestige model but they’ll come and have a look. I think that in itself will open up the rest of the range to those families.”

Mr Devers said Chinese cars would gain greater acceptance in Australia from young car-buyers who were more concerned with value than brand perception, but that wouldn’t make Suzuki’s $13,990 driveaway Alto – the first car to be imported from India – redundant in the marketplace.

“I’m very aware of consumerism and generation X and Y don’t have the preconception of the long-standing brands, so the consumers – let’s say the 20 to 35-year-olds now – don’t have a preconception of what an automotive brand is or should be. They’ll be looking for value – they do now.

“They’ll aspire once they’ve got their mortgages paid down and things like that for something like a BMW or a Suzuki … but initially they’ll look around and if these cars are reasonable quality and the price is right they’ll have a look at them.

“But will they have six airbags and ESC and ABS and have quality at a competitive price.”

Mazda Australia last week said it was largely immune from the Chinese market onslaught because it didn’t offer a sub-light-sized or sub-$15,000 model as Suzuki does, but Mr Devers said all makers of light and small cars should be worried by the potential impact of a host of new small cars from China.

“Some manufacturers are arrogant and blind to the fact that consumers buy in price bands – whether it’s $10,000 to $15,000 or $15,000 to $20,000,” he said.

“You might want to be in there with the rest of them but you are from a consumer’s point of view, and not enough manufacturers look at the consumer to see what their thought process is.

“It’s no good saying we’re there if the consumer’s saying you’re somewhere else.

If someone’s got $15,000 to spend they’ll always find another couple of thousand if the deal’s right.

“Consumers buy in price brands. They do the research at the six-week mark. They put four or five cars in their shopping basket at four weeks, they narrow it down to two or three and in the second week they’ve decided what they’re going to buy and go shopping.

“I think financially a lot of them (brands) are still in strife. Anyone that was big in America has been burned a lot. I don’t want to be personal but if you look at Honda’s performance they only did 3000 cars last month and are 30 per cent down.

“They’re not in trouble but instead of going forward they’re dumbing down everything. To win back market share is very difficult and they’ve gone from eight per cent to about 4.5 per cent.

“To claw that back when everybody else is coming – VW is coming with a huge model range – is very, very difficult.”