The board of MSIL, which agreed to hand over a third term to Ayukawa, on March 27 reposed faith in the sales and marketing veteran as Maruti Suzuki prepares to face its toughest challenge in decades.
Kenichi Ayukawa will become the longest-serving Managing Director of Maruti Suzuki (MSIL), besides perhaps becoming the only executive to stay beyond the retirement age for an executive position.
The board of MSIL, which agreed to hand over a third term to Ayukawa, 64, on March 27 reposed faith in the sales and marketing veteran as Maruti Suzuki prepares to face its toughest challenge in decades.
Tepid demand, rising costs, additional competition from new companies, stringent regulatory challenges, technology sourcing and sharing with a new partner, planning long term production capacities and retention and expansion of retail network partners are some of the tasks for Ayukawa going ahead.
The board's decision to retain Ayukawa also helps in charting a smoother road for switching over to Bharat Stage-VI and other regulations beyond 2020.
Unlike other international automotive companies such as Honda, Nissan and Toyota, MSIL has had stable continuity at the top order, thereby helping it manage its goals better. Under Ayukawa, the market leader has only strengthened its position in the domestic market.
When he took over in 2013 after the retirement of Shinzo Nakanishi, the company’s market share stood at 39 percent. Six years later, it had a share of 51 percent by close of February.
It was also under Ayukawa that MSIL became aggressive in the premium car segment, selling them under a very different looking retail format called Nexa. While the debut with S-Cross did not meet expectations and they were forced to sell them at discounts, subsequent models such as Baleno and Ignis turned the tide for MSIL. Baleno is now the fourth highest-selling model in the country with average monthly sales of 18,000 units.
Aided by his senior RC Bhargava, who is the non-executive Chairman, Ayukawa's Maruti Suzuki comfortably sailed past the minimum voting level mark when minority shareholders voted on Maruti’s most controversial decision in its history. Proxy advisory firms and analysts became skeptical of parent Suzuki's plan of manufacturing cars in India and asking MSIL to sell them, thus reducing the latter's stature to just a sales company.
Maruti was able to avoid bearing huge investments for setting up car making factories while instead using the same in buying real estate. Maruti's management believed that in the long run should the car sales business be generating lesser profits than today, then less number of dealers will join the business.
Thus, MSIL decided to buy land and real estate (the most costliest component in car retailing activity) and it can give out the space for running Maruti showrooms on rent to dealers. Little surprise that the decision came when the sales veteran Ayukawa was at the helm of the company.
But Ayukawa does not deny the current situation. The passenger vehicle (PV) market is at its slowest in four years as per data shared by the Society of Indian Automobile Manufacturers. New PV sales grew by just three percent as against the expected 8-10 percent. More buyers are interested in discounts than the product package.
Manufacturers such as Kia Motors, MG Motors, Peugeot Citroen, a resurgent Volkswagen and a rising Tata Motors are knocking on Maruti’s doors for a head-on challenge. Brezza, one of Maruti’s most successful products is witnessing maximum rivalry while growth of Dzire, Maruti’s top-seller, is stagnating.
After hitting a high of close to Rs 10,000 in July last year, MSIL’s share on the Bombay Stock Exchange is now trading close to its 52 week low. Will Ayukawa's tenure extension help it gain lost ground?
