Comment: Suzuki's Image Problem

Kevin Ash

October 31

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The recent news that Suzuki is closing down a third of its UK dealer network had an air of inevitability about it, following the collapse in the company`s sales here in the last few years.

These have plummeted from 20,000 in 2007 to a projected 7,000 in 2011, a fall of 65 per cent, and even that's looking optimistic.

Because Suzuki had the largest dealer network, the number of bike sales per dealer was already below average even at 20,000, so with barely more than a third of that passing through showrooms, clearly many dealers were going to be struggling to sell enough Suzukis to justify the floor space and support.

Suzuki`s problem is about more than adapting to the new numbers though, its entire sales model and image will have to change. Of all the Japanese manufacturers, Suzuki was strongest in selling on price: stack `em high, sell `em cheap, and offer big discounts on bikes already priced below their competitors. Discounting is a dangerous strategy though: it works when the numbers are large and the market is buoyant because the small profit margins still add up to useful numbers. But it eats directly into front line profits, and while Ducati is busy generating loyalty to Ducati, Harley-Davidson to Harley-Davidson, BMW to BMW and so on, all without any extra leverage from a flexible price tag, Suzuki customers are loyal only to low prices.

The new GSX1250FA makes the point. This is one of the company`s few current successes, and it`s been lauded by many, including myself, as one of the best buys of 2010. And it is, but that`s wholly dependent on the very low price, without which it would be a capable but otherwise ordinary motorcycle.

Now look at what the yen has been up to, since last summer the Japanese government stopped very expensively keeping it artificially low. In July 2008 one British pound would buy you 212 Japanese yen. Two years on and the same pound will get you only 132 yen, a massive 38 per cent drop. In the same period, the euro has been relatively stable, falling only four per cent - that got all its troubles out of the way ahead of the yen and things have settled more since then, but as I`ve said, the Europeans are less price dependent anyway.

Suzuki can only profit from the GSX because it`s essentially a very old design whose development costs mostly have already been covered, and even then it`s hard to see how they can make much money from it. New designs - and they`re needed - do without that luxury, yet they`ll be pitched at customers who are still used to buying Suzukis for their low prices.

These do come of course with Japanese design and quality standards so we`re not talking cheap Chinese scooters or anything, but Suzuki doesn`t match Honda in this respect, and in the last few years the Europeans have caught right up, certainly enough for this no longer to be an issue.

Suzuki`s ace has been aced by the yen (or more accurately, its artificial yen advantage has been taken away) and because it depended so heavily on that one factor, now the sales have been hammered. Which means Suzuki must develop other reasons to buy a Suzuki, rather than a Yamaha, Honda, Kawasaki or anything else. This will be very difficult as the company is inherently conservative, and moving away from its generally unadventurous designs will demand a major shift at a fundamental level, not to mention the huge investment it will take to refresh the notably ageing range, another factor that`s not helping the cause.

It`s not impossible - the GSX-R range generates strong loyalty and shows it can be done - and this is an opportunity to produce some unique engine layouts, the most powerful factor in defining a brand. But establishing specific Suzuki values beyond price is still a major task.