In my part of the world, if you want a small, practical, affordable to purchase and economical to run car, then Suzuki is one of the best options in the market. In fact, I purchased a Suzuki Swift Sport myself for the fact that it was easily the most entertaining and fun new car I could purchase within my budget, while “getting the job done” in terms of day-to-day practicality and economy.
For motorists across the world, Suzuki is a byword for affordable motoring and cars that often deliver driving experience that far exceeds the expectations you might have considering the price tag.
Cars such as the Swift and the adorable-yet-capable Jimny are volume sellers in many markets (don’t believe me? Come to New Zealand and you’ll see a Suzuki Swift on every street just about, and the Jimny seems to be omnipresent as well).
However, Suzuki stopped selling cars in one of the world’s biggest car markets – the United States – in 2012, despite many years of presence in the market.
So why doesn’t Suzuki sell cars in the United States any more?
In this edition of Car Facts, I’ll explore some of the reasons why Suzuki no longer sells cars in the American market.
Table of Contents
A Question Of Money
As with just about any question that relates to why a particular automaker did a certain thing, Suzuki’s departure from the United States ultimately comes down to money (or a lack thereof, due to poor sales).
This chart shows the precipitous decline of Suzuki’s USA car sales in the years leading up to the brand’s demise stateside:
Suzuki simply couldn’t sell enough cars to warrant continuing to try and sell into the market. American customers weren’t buying Suzukis, and the company wasn’t having success in convincing them to do so.
Part of the problem car makers can encounter when having sales difficulties (and – to be fair – this applies to any brand in any industry/market) is that once sales start falling, you can find yourself in the business equivalent of an irrecoverable aircraft stall; in other words, spiralling towards the ground.
Reduced sales volume means a vicious cycle can take root:
- Sales decrease
- The company has less revenue to work with, and debt can build up
- Management cuts marketing and promotional budget in response to weaker sales performance
- Dealerships struggle, laying off staff, meaning that market presence and sales capability diminishes
- Weaker market positioning and diminished public reputation mean that sales decrease further (as who wants to buy a car from a brand that might not be around to see out the warranty period?)
Once sales started to decline, it was always going to be an uphill battle for a minor player like Suzuki – whose cars were never all that well suited to the American market – to climb back up towards the peak.
In its statement announcing the withdrawal from the American market, Suzuki also apportioned blame to other factors, such as:
- An unfavourable exchange rate
- High costs of compliance with American regulatory requirements
- High costs of maintaining a distribution network
- Limited number of models suitable for the American auto market
Had sales volume been sufficient to generate enough revenue and profit, these factors could have been overlooked and/or mitigated, but ultimately became the final nails in Suzuki’s American sales coffin.
For many years, Suzuki had also enjoyed the financial support of General Motors, which had initially purchased a ~5% stake in the company back in 1981 and eventually grew that stake to roughly 20% by the early 2000s. Plagued by financial troubles of its own, General Motors sold out of Suzuki in 2006, which represented two distinct problems for Suzuki.
Firstly, there was a financial impact, and this reduced support made life harder for Suzuki. Losing a key investor is always a challenge.
Secondly, Suzuki had worked with General Motors to develop and adapt cars for the American market. In particular, the second generation XL-7 SUV (which was built on the same platform as the Chevrolet Equinox) which debuted in 2007 was developed and manufactured by Suzuki and GM working together. The goal here was to release a Suzuki-branded vehicle into the American market that would give the company a strong opportunity to win market share. However, despite the XL-7 being a decent vehicle, it wasn’t as good as the likes of the Toyota Highlander and it never sold well. Sales were discontinued in 2009, by which time Suzuki no longer had the financial and development input of General Motors providing a “conduit” to the American market.
Other Market Focus
Suzuki’s withdrawal from the American market doesn’t mean the brand is a failure in the international context. Instead, one could argue that Suzuki has been astute in trying to build market share and sales volume in markets that are perhaps better aligned to the brand’s strength (building simple, economical, affordable and typically small vehicles for affordable transport).
For example, Suzuki has made significant inroads into the Indian market with the “Maruti Suzuki” brand, which originally was a JV partner and is now majority owned by Suzuki Motor Corporation, the Japanese parent company. In fact, Maruti Suzuki has a more than 40% share of the Indian passenger car market.
Suzuki also sells cars in high volumes in the Japanese domestic market, particularly kei cars such as the Wagon R. The Wagon R has consistently been a top selling kei car since the early 2000s. As with India, Suzuki’s ethos aligns with the needs and wants of JDM car buyers.
New Zealand (where I live) is another example where Suzuki does solid business trading on its reputation for selling reliable, practical-for-their-size and affordable cars. Suzuki dealers also tend to offer compelling value in terms of complimentary servicing, strong warranty protection and more.
It makes perfect sense for Suzuki to focus on markets where they have an easier time selling cars.
At the time Suzuki left the American market, one Japanese motor industry analyst put it well. To paraphrase, he said “Suzuki doesn’t need America, and America doesn’t need Suzuki” (source)
Why Didn’t Suzuki Cars Sell Well In The United States?
Fundamentally, the reason Suzuki left the US is because of poor sales results. The company didn’t sell enough cars to warrant a continued presence in the market. Once sales started declining aggressively, it was “all over rover”, as the saying goes.
But why didn’t Suzuki sell well in the United States?
Most motor industry analysts agree that Suzuki cars were of limited appeal to American buyers.
It’s not that they were bad cars, it’s just that Suzuki’s lineup never stood out to those in the American car market. Suzuki never really did anything to make American buyers sit up and take notice. Partly this is Suzuki’s fault, and partly it’s the fault – or at least nature – of the American car buying public.
Suzuki has typically done its best work developing small cars, which don’t tend to be so popular in the United States. In contrast, in European and Asian markets buyers purchase smaller cars by the truck load (read here why European cars are typically smaller).
This inherent “conflict” with Suzuki’s competitive advantage led to a need to partner with companies, such as General Motors, to develop and/or badge vehicles like the XL-7 that were more palatable to American wants and needs. Another example is the Suzuki Reno, which was effectively a badge engineered GM Korea/Daeweoo Lacetti sold in the American market.
However, these American market models were never more than average options in a crowded market. Compare this to Suzuki’s international focus on small cars, where it is one of the leading brands in that particular niche.
Even when Suzuki did bring its own excellent small cars to the market, Americans didn’t typically warm to them. For example, the Suzuki SX4 mini SUV received generally good reviews when released in the United States in 2008, but only sold shy of 30,000 units in its first year. This figure quickly dropped off to under 12,000 annual sales by 2010).
The Suzuki Samurai/Jimny was sold variously in the United States, but its reputation suffered when a 1988 issue of Consumer Reports claimed the vehicle was prone to rollover accidents. In many markets, Suzuki’s micro 4×4 is one of its most popular, desirable and high-profile models (for example, here in NZ the current generation Jimny is the new “must have” vehicle for trendy people, particularly female buyers – so much so that the vehicle has found its way into meme culture) but it struggled in the United States with a poor reputation.
One other factor to consider is that Suzuki’s demise coincided with the Global Financial Crisis. I suspect that even if the GFC hadn’t occurred, Suzuki would have struggled, but there can be no doubt that this financial armageddon accelerated the brand’s decline in the United States.
Subaru vs Subaru
To close out this article, I thought I’d use the example of Subaru to show how another smaller scale Japanese car company has made decent inroads into the American market over the years.
There are two factors working in Subaru’s favour.
Firstly, Subaru has done a better job at identifying a niche and sticking to it. Read my article on Subaru’s popularity and loyal following for more info, but basically Subaru has built up its reputation both internationally and in the United States as being the “go to” car brand for those needing rugged and dependable transport for an outdoors lifestyle or winter conditions, particularly thanks to its legendary AWD system and epic practicality on most models.
This isn’t to say that Suzuki doesn’t have a niche.
Suzuki’s niche is building excellent small cars, but this was then watered down by trying to sell rebadged larger cars (stripping away the company’s competitive advantage) to the American market. Imagine, if you will, McDonalds deciding to compete with KFC not by positioning a burger as a superior meal to fried chicken, but instead by trying to repackage another brand’s fried chicken as its own. That is basically what Suzuki did with much of its American lineup.
However, unlike Subaru (whose “value proposition” is compelling to buyers in parts of the United States with more challenging driving conditions), the other contributing factor that led to Suzuki’s demise is that American buyers haven’t traditionally been big buyers of smaller cars. The badge engineered vehicles were no better than domestic brand alternatives, and the actual small cars were of limited appeal. Compare this to other markets where Suzuki does solid volume to buyers who want smaller vehicles.
Subaru proves that a niche player can be successful, and look no further than Tesla in its early days for another example of a manufacturer playing that game. But having a niche alone is not good enough – your product must be sufficiently compelling and desirable, and Suzuki always struggled here.
Paradoxically, Suzuki had tended to enjoy more success in the past by offering its smaller vehicles to American manufacturers to repackage. For example, the Geo Metro and Chevrolet Sprint were just manufacturing variants of the Suzuki Cultus.
In short, Suzuki’s niche and America’s motoring preferences didn’t align particularly well. Combine this with a range that lacked any standout performers, and you had a recipe for sales failure.
The rest, as they say, is history, and this is why Suzuki left the United States market and will probably never return.
