Suzuki Quits China, Where Its SUVs Aren’t Big Enough

* Suzuki’s state-run joint venture partner, Chongqing Changan Automobile Co. Ltd., will take over Suzuki’s 50% share and will carry on building Suzuki-branded cars

* Suzuki also was one of 30 companies that failed to produce a new-energy vehicle offering over the last year, and is expected to be disqualified from producing new-energy vehicles

(Beijing) — Japanese automaker Suzuki Motor Corp. announced that it is bowing out of the race for the Chinese market as its more-compact car models are increasing being left in the dust by hulking domestic rivals.

The decision is due to changing trends in the Chinese car market, where consumers increasingly favor larger SUVs over Suzuki’s smaller, relatively lower-end offerings, company Chairman Osamu Suzuki explained in a statement on Tuesday. Its state-run joint venture partner, Chongqing Changan Automobile Co. Ltd., will take over Suzuki’s 50% share and will carry on building Suzuki-branded cars.

“Approximately 25 years ago, we launched the Alto in China, and since then we have made efforts in cultivating the Chinese market,” Suzuki said. “However, due partly to shifting of Chinese market to larger vehicles, we have decided to transfer all equity to Changan Automobile.”

Suzuki was once a leader in the Chinese car market, with its joint-venture vehicles making up around 30% of sales between 2002 and 2006, according to the National Car Information Association. However, China’s homegrown brands have improved their offerings, and Chinese consumers are increasingly purchasing midrange cars, eating into the company’s sales since 2007, said association Chairman Cui Dongshu. While the company racked up major growth in India, Japan and Indonesia, its year-on-year sales fell by a third in China last year.

“Suzuki is a victim of the growing taste for higher-end cars in China’s car market,” said Zeng Zhiling, the general manager at Shanghai-consultancy LMC Automotive. “The market for low-end cars is shrinking from being about 37% in 2013 to just 2.1% of sales in 2017, and that has hit Suzuki hard. At the same time, it is failed to adapt to changing market conditions.”

This is reflected in a Sept. 3 notice from the Ministry of Industry and Information Technology that shows Suzuki was one of 30 companies that failed to produce a new-energy vehicle offering over the last year, at a time when the government is encouraging such offerings through various subsidies and tax rebates. The company is expected to be disqualified from producing new-energy vehicles in a ministry announcement due on Sunday.

Suzuki is not the only Japanese company feeling the heat from greater competition in the Chinese market. China’s homegrown Zhejiang Geely Holding Group Co. Ltd. overtook Nissan Motor Co. Ltd., Honda Motor Co. Ltd., and Toyota Motor Corp. in China sales in the first half of 2018, moving into third place. It remains a significant distance behind Germany’s Volkswagen AG and U.S. company General Motors Co. in terms of overall sales, however.

Contact reporter Ke Dawei (daweike@caixin.com)