Mass acquisition of the king of mini cars to open up the Indian market

After the global financial crisis, the auto industry is undergoing a new round of reshuffling, and the change of division and merger will push a fierce industry fizzled to a climax.

Anxious for "downsizing," GM and Ford are wielding a knife to cut off their unprofitable sub-brands, and the mass of people who already own 10 sub-brands are still attacking and expanding this "car carrier."

The lesson of "big beauty" is also alive and realistic. Under the impact of the financial crisis, the global auto industry is undergoing a marked change. In the cold wind, there were people who were moving lightly and some people were warming up. Which compartment is the real destination between divisions?

In the cold wind, there were people who were moving lightly and some people were warming up. Anxious for "downsizing," GM and Ford are wielding a knife to cut off their unprofitable sub-brands, and the mass of people who already own 10 sub-brands are still attacking and expanding this "car carrier." After the global financial crisis, the auto industry is undergoing a new round of reshuffling, and the change of division and merger will push a fierce industry fizzled to a climax.

On the evening of December 9th, local time, Volkswagen's Chairman Wendeen and Suzuki Motor's president Suzuki Suzuki jointly announced that they will carry out capital-level cooperation through mutual stockholding and joint development of energy-saving compact cars. Just a few days ago, Volkswagen had just spent 3.9 billion euros to secure 49.9 percent of Porsche’s shares.

The rapid expansion of the public quickly accelerated the pace of catching up with Toyota. However, Volkswagen, which builds the Auto Alliance, is also facing considerable pressure.

Opportunities in emerging markets

Under the global environmental pressure of energy saving and emission reduction, compact, more efficient power systems and low carbon emissions have become the future trend of automotive products. The marriage between VW and Suzuki is based on these considerations.

In the field of global mini-vehicles, Suzuki Motors, which started with motorcycle technology, has a leading position in the engine and structural design of micro-cars up to and including 0.6 liters. The acquisition of the king of the world's micro-cars is the most obvious signal for Volkswagen to enter the mini vehicle sector. The Volkswagen Group acquired a 19.9% ​​stake in Suzuki Group for 2.5 billion euros. Suzuki Motors will replace Volkswagen shares with half the income from this transaction (about US$1.25 billion).

Both have complementary advantages in product mix, global distribution, and manufacturing capabilities. Since the public is not absolutely holding Suzuki, the two parties still have a competitive relationship, but Volkswagen and Suzuki have said that they will share components and maintain good cooperation while competing.

The cooperation between the two parties has taken the lead. According to foreign reports, Volkswagen Group and Suzuki Motors will jointly launch a small car in the Indian market. “The car is priced around US$4,300 to US$5,400 (about 200,000 to 250,000 rupees) and was introduced to replace the best-selling Alto on the Indian market.” Suzuki Motor India Maruti - President Suzuki took the lead in revealing the news.

In the United States market share of less than 2% of the public, naturally hope to take advantage of the rise of emerging markets to achieve their desire to dominate the car. All kinds of signs have shown that the global auto industry's focus is turning to Asia, and Suzuki's advantages in India, Southeast Asia and other Asian markets are important reasons for attracting the public.

In the context of economic recovery, China’s auto sales almost doubled in November, and according to statistics from the Indian Automobile Manufacturers Association, India’s passenger vehicle sales in November reached 133,687 units, an increase of 61% from the same period last year. From April to November this year, the number of passenger vehicles sold in India was 1.22 million, an increase of 20% over the same period of last year. India’s truck and bus sales in November doubled from the same period last year to 40,847.

The Indian market has soared to the second fastest growing car market in the world. In addition to the public, other auto companies have also smelled the tempting aroma of this cake. Not long ago, SAIC and GM planned to invest 650 million U.S. dollars to establish a joint venture to produce low-cost cars in India. This is when Chinese auto companies enter the Indian market again after a lapse of 20 years.

Ulrich Proske, head of finance for Volkswagen India, said in an interview that in 2014, the annual sales volume of the Indian automobile market will increase from 1.4 million this year to 2.2 million, which is an alarming rate of development. However, Volkswagen's share in the Indian market lags far behind other international car companies.

According to Volkswagen’s original plan, the timetable for catching up with Toyota as the world’s largest automaker is set to be fixed in 2018, but with the entry of high-quality assets such as Suzuki, this goal is expected to become a reality in a year or two.

Multi-brand investment pressure

For Volkswagen, the stake in or alliance with Suzuki is only a preliminary attempt for cooperation between the two sides. As the head of the Volkswagen Group, Wendeen is very clear. If he wants to become the dominant global car market in the future, the public must consider holding Suzuki. On the second day of the signing of the cross-shareholding agreement between the two companies, German media broke out and Volkswagen will acquire 33% of Suzuki’s shares and become the largest shareholder.

However, it may not be possible for Volkswagen to fully control Suzuki's abacus. Although Suzuki only sells about 2 million vehicles a year, it is a well-run company. Suzuki completed its 2010 sales plan three years in advance as early as fiscal 2006. Suzuki increased its fiscal 2010 plan to 3.5 trillion yen, profit of 175 billion yen and global sales of 3 million vehicles per year. . Even under the influence of the financial crisis, Suzuki’s profit fell sharply in 2008, but it still maintained a profitable state with net profit of 27.43 billion yen. It is one of the few companies with good operating conditions among Japanese auto companies.

In the fiscal year ending in March of this year, most Japanese automakers including Toyota and Nissan suffered losses, but Suzuki, which produces small cars and small cars, remained profitable due to the strong emerging market. The net profit was 27.43 billion yen.

The cooperation between Volkswagen and Suzuki is obviously not to share the profits of Suzuki. However, if Suzuki cannot be completely acquired, how to transform Suzuki's technology and market into its own is testing Wendeng's wisdom.

The acquisition of Daewoo by General Motors may be used for reference by the general public. After the acquisition, Daewoo became the center of the research and development of the general-purpose global R&D system. But the premise of this model is that Volkswagen completely acquired Suzuki.

What is even more crucial is that within a year of the acquisition of two passenger cars (Porsche, Suzuki) and a commercial vehicle (German old professional car assembly company Kaman Automobile Company) income, the public's expansion is too radical?

At present, Volkswagen already has Scania, Audi, Bugatti, Bentley, Lamborghini, Skoda, SEAT, Porsche and other 10 brands, and foreign media disclosed that Volkswagen Group has attempted to acquire truck giant German Man Group to create mass Truck Alliance.

The predecessors of the disintegration of the automobile alliances such as GM and Ford are still in the ears. Whether the public will also fall into the situation of “turning their heads in boat accidents” remains doubtful.

The CIC Consultant concluded in the "2008-2012 China Automotive Industry Investment Analysis and Forecast Report" that the multi-brand strategy has a significant effect on the manufacturers' long-term product lines seizing the market and dividing the brand grades, but owning sub-brands. It does not necessarily represent the absolute strength of the company, nor does it mean that the market share will be high. General Motors is on the verge of bankruptcy, reflecting the evil consequences of poor multi-brand operations.

Although Wendeng strongly disassociates Volkswagen's multi-brand strategy from those of the general public, the biggest difference between VW and GM is that each VW brand has its own uniqueness. Each brand has its own headquarters. Independent R&D, marketing and sales departments play a decisive role in brand building.” However, the success of VW’s multi-brand strategy in the global auto market, which has not yet fully recovered, remains questionable.

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