The Indian-made Japanese car

tracks its glorious past, tentative present and uncertain future.

This Monday was significant not just because the market crossed the magical 20K figure, it was important also for the Indian automotive industry.

Osamu Suzuki, the ageing but sharp-as-a-katana patriarch of the Suzuki empire, was in Delhi to announce an investment of $1.8 billion in research and development, while Carlos Ghosn, the charismatic manga-like hero and CEO of Nissan and Renault, was busy signing a three-way collaboration with none other than Bajaj to make an ultra-low-cost car.

R&D and Suzuki? Yes. A small car venture in India by a Japanese company? Yes. Here are two Japanese firms that have understood the true potential of the Indian car market "" one that has been around a while and is making giant strides, while the other does not want to waste a minute to get into the thick of action.

Investors in Nissan and Renault around the world will be praying that Ghosn has read the Indian market right because he now has four ventures in India for the Nissan-Renault combine "" a product specific JV with Mahindra & Mahindra, another with Ashok Leyland, a small car facility coming up near Chennai, and now the small car tie-up with Bajaj.

But as an observer of the industry for over a decade and as a visitor at the recent Tokyo Motor Show, there are reasons to think that most Japanese might be a bit late getting on to the India bus.

Let me teleport you straight to a huge dining hall where Honda bigwigs were meeting journalists from the Asia-Oceania region last week. (Mind you, while India forms part of Asia, China is an altogether different market as far as Honda is considered.)

Our Japanese hosts called it "" since they had to call it something "" executive mobility, which meant that the top Honda management would traverse down the 20 tables in the room in a matter of two hours, so journalists seated there could pose intelligent questions.

By the time Takeo Fukui, the president of Honda Motor, reached my table, most journalists were drenched in Asahi and Kirin "" one was even trying to balance a bottle of sake on his head. I was waiting for my big moment: "Between China and India, going by the form of governments they have, which one would you consider the more important market for Honda five years down the line?"

I crossed my fingers hoping my question would not get lost in translation. To reach the top slot of the second-most successful car maker in Japan, you need to be a whiz of sorts "" someone who understands and speaks brilliant English, but nevertheless waits patiently for the interpreter to translate the question while formulating the answer in his mind.

A blunder in answering the question could mean a lot for a host of people "" workers, vendors, even customers. Eventually the interpreter had the answer "" the Indian market with its democratic government is more stable but the Chinese market with its numbers is equally important. And Fukui-san was gone.

I tried, without help of sake, to put things together in my mind. The previous day I had asked Fukui-san, "What brand image does Honda want to create for developing markets "" sporty, premium or value-for-money?"

Without help from an interpreter, he had said the virtues that sold Honda in different markets were the same and it would continue to be so. "In India, we have gone the premium route for the last 10 years instead of going mass market and I think we did the right thing," he added.

Elsewhere, Toyota president Katsuaki Watanabe, when quizzed about the exciting iQ ultra small car concept unveiled at September's Frankfurt Motor Show, had denied it had anything to do with India.

He added that Toyota was not yet thinking of a car specific to the Indian market. When asked whether Toyota would launch Prius "" the hybrid that is selling in reasonably large numbers in the US "" in India, he said that Indian regulations are not clear on the subject of hybrids, so it is not a possibility as of now.

Had Fukui-san or Watanabe-san been allowed free rein to say what they wanted, they might have told me, "Dude, we are trying to understand how these developing markets work while trying to play a major role in developed markets where we are making a hell of a lot of money. In other words, we are not going to spend all our resources on building an India- or China-specific car that costs $3,000. Instead, we will build hybrid Accords and Camrys that we can sell to eco-conscious and suitably rich Americans in large numbers for twice the money."

And they would have in all probability added that those car makers who are not present in the US, such as Renault, might afford to develop cars for developing markets. For the time being, therefore, we in India and China will have to do with what we have, period.

That should explain why India, one of the largest markets for small cars, has not yet had a small car from Toyota, Honda, Nissan or Mitsubishi. The brilliant exception is Suzuki, which builds and sells five small cars and has just overtaken its parent company in Japan when it comes to numbers.

Suzuki has been around for 25 years in India and has learnt the art of selling cars here. It's true: Suzuki did enjoy a period of near-monopoly in the market, and the quality of its products here cannot be compared to those models elsewhere in the world. It's also widely known that the "original" cars sold by Suzuki in the early eighties in India lasted so much better than the equivalents it builds today.

Had there been one, the Maruti 800 might have been inducted into the Japanese Automotive Hall of Fame as the only model to have lasted this long. India taught Suzuki a few other habits "" like producing basic models of cars without left-side rear view mirrors.

In catering to a price-sensitive market, it also toned down refinement and some virtues of automotive safety. Suzuki has since realised that the Indian car buyer has evolved enough to pay premium money for contemporary design.

That's how, at Hamamatsu, it found the engine bay of the Swift the ideal place in which to plonk the old Esteem engine, pricing the result smartly for India. It's something Toyota and Honda would love to do too, but can't "" since they cater primarily to the more evolved European and American markets.

There are four virtues that make the quintessential Japanese car "" refinement, reliability, economy and affordability.

The problem is that you need to compromise on the refinement front to build affordable cars that can contribute to the bottomline of a car company. Or continue to build a car for so long that it costs virtually nothing to build.

The Mitsubishi-Hindustan Motors combine built the Lancer for a decade in India before it changed the model, and it still builds a Pajero that is two generations behind (and very attractively priced too).

The worrying factor for the Japanese is competition. Hyundai, which is on a giant killing act even in the US, seems to have understood the game pretty well. It set up a 100 per cent subsidiary in India 10 years back and launched operations with a small car.

Sure, it still struggles to sell premium cars but has a firm footing when it comes to small cars and even exports a fair number. That also means it has its pulse on quality. The South Koreans have proved they can build quality cars in India using cheap, yet quality, labour and sell it to the rest of the world. As you read this, it has launched the i10, an all-new car which will be built in India for the world.

While Korean quality is a worry, even more worrying for the Japanese is the attitude of the Indian car buyer who bought Tata Indica and its siblings in relatively large numbers.

Ratan Tata, who made his mark by building and selling cars that are cheap to buy and run, is now threatening to lower prices further to address the needs of those who traditionally bought motorcycles.

Questions posed to high-ranking Japanese executives on Tata's Rs 1 lakh car result in raised eyebrows and worry lines. They explain patiently that the cost of the average Japanese small car is high because the quality is high, that they cannot even consider building normal hatchbacks, let alone attempt basic transportation.

If you look carefully, you will realise Japanese car giants have taken a few strides towards aligning their global business models and thereby providing cars for the developing market.

The Honda City, as we know it today, is an extension of the Jazz platform which does well in Japan and Europe. The Toyota Innova belongs to the IMV platform that builds pick-ups and full-fledged SUVs meant for emerging markets too.

But "the very small car" remains a challenging frontier. Honda is looking at building the all-new Fit, a four-door hatchback that is about the size of a Suzuki Wagon R, at its new Rajasthan facility "" it is another thing that it could cost as much as a Swift when it hits the showrooms.

Perhaps Honda will be in a position to charge such a brand premium by then, but the equation will change a great deal with hatchbacks retailing as low as Rs 2 lakh!

The lack of unpreparedness when it comes to developing markets can be seen in the Japanese approach to diesel engines. While both Toyota and Honda pioneered the hybrid brigade a decade back, they still do not have a small capacity diesel that can provide an eco-friendly solution without affecting affordability.

The only diesel engine Honda has at present is meant to power executive sedans in Europe and won't go under the bonnet of a City. This is a clear indication that Honda and Toyota were betting big on the 13-14 million strong US market rather than markets like India where diesel is becoming a rage.

Suzuki was wise enough to get the requisite technology from Fiat through its General Motors connection and has even built an engine plant to put together the 1.3 litre common-rail turbo diesel which drives the Swift diesel. Today it cannot build enough Swift diesels but will soon have a range of cars powered by the same economic, powerful and clean engine.

Tata has smelt modern diesel too and is getting a similar engine from Fiat, thanks to a tie-up with the Italian firm. The need of the hour is a small capacity diesel engine but Toyota and Honda are still focusing on money-spinners like second and third generation hybrid solutions or high performance cars for developed markets.

None of the Japanese giants showed anything remotely focusing on India or China at the 40th Tokyo Motor Show while they ensured that the hybrid and fuel-cell future looked bright.

Two years down the line things may change. Maybe the Suzuki pavilion at the 41st Tokyo Motor Show will have an India-specific ultra-low-cost diesel car that returns 30 kpl.

Perhaps the first reference models of the Nissan-Renault-Bajaj car will be on display. And maybe, just maybe, Honda and Toyota would have woken up from their slumber to show off a rural transportation solution for India that runs on fuel-cells. That will be another story.