Japanese Carmakers in Kuwaiti Automotive Sector Research Paper

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Introduction

The automobile industry is very competitive across the world and is especially so in rich economies. The main competition is usually found between manufacturers based in Europe, the United States, Japan, and Korea. Kuwait being an oil-rich economy too faces the same situation of high competitiveness. This paper is essentially a SWOT analysis of the automotive sector in the country with respect to six major automakers. They will be then compared to the Japanese manufacturer Daihatsu. The six manufactures that will feature in this report are Hyundai, KIA Motors, Suzuki, Nissan, Toyota, and Mitsubishi. The first two are leading manufactures from South Korea and the rest including Daihatsu are reputed manufactures from Japan.

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The automotive industry in Kuwait

As mentioned earlier, this industry in the country is very competitive. According to a report by Business Monitor International, it has reached a point of stagnation in the country. “Kuwaiti automotive sales are likely to stagnate over the next five years, but the revaluation of the Kuwaiti dinar gives Japanese and European brands hope of competing in this price-sensitive market”. (BMI’s Executive Summary, The Kuwait Auto Report 2008, Business Monitor International). This revaluation will bring some relief to the above-mentioned auto manufacturers. The report also states that there is room for growth for Japanese and European models. It also states that the devaluation of the American dollar will give a cost advantage to manufacturers from that country. The market structure and policies in the country are also a reason for this slump though the situation in other Gulf states is more conducive for growth. The report states that the Kuwaiti market is highly prices sensitive which will be a factor in the SWOT analysis.

Background of the manufacturers

A brief background of the manufactures is also provided here. Hyundai Motors is the largest automaker in South Korea and manufactures a wide range of automobiles (including heavy vehicles). They also have a variety of models to choose from. The company was formed in 1946 by a self-educated man called Chung Ju-yung and was engaged in manufacturing automobiles. The company later diversified into heavy industries, construction, and shipbuilding. Initially, the cars made by the company were considered to be having very poor quality. But massive efforts during the 1990s changed this and the quality is now equal or above its competitors in many respects.

KIA Motors (formerly KIA Industries) was started in 1944 to manufacture bicycles. It later started making heavy-duty vehicles and then as a manufacturer for Peugeot and Fiat. It began to manufacture vehicles under its own brand only after this. The company was in financial difficulty during the late 1990s and was taken over by Hyundai in 1999. the company returned to profitability after this and is considered to be a reputed manufacturer.

Suzuki Motors started off in 1909 as a silk and cotton loom manufacturer. The company then later diversified into making motorcycles. It had a brief period of manufacturing cars during the 1930s and 1940 till World War II broke out. It resumed its manufacture of automobiles and was known for its small and mid-sized cars. After the company built its reputation in Japan it began moving overseas and is now one of the most respected auto manufacturers in the world.

Nissan is also a well-known manufacturer that started operation as a maker of Datsun cars. The company had various names till it was named Nissan Motors in 1933. The company went through bad times during the 1990s and eventually formed a global alliance with Renault of France. The company produces a wide range of models that includes cars and heavy vehicles.

Toyota is one of the most respected manufacturers in the world today. Their products are known for their quality and technology used. The company was officially formed in 1935 by Kiichiro Toyoda. This company is famous the world over for its Kaizen or just in time systems.

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Mitsubishi Motors (part of the Mitsubishi group) was officially formed when it launched the first production automobile in Japan in 1917. The company later began to specialize in commercial vehicles. It was only after the 1950s when the Japanese economy began to pick up that the company also focused on cars. The company has a strategic alliance with Daimler Chrysler and 33% of shares in Mitsubishi are owned by the latter company.

Even though Daihatsu was formed in 1907 it only began the manufacture of cars in 1958. Till then it was specializing in three-wheelers. This company is also well known for its smaller-sized cars and off-road vehicles. The company is now owned by Toyota Motor Corporation. The company specializes in making small cars and off-road vehicles.

SWOT Analysis

Hyundai Motors

  • Strengths: Hyundai is very priced competitive when compared to the Japanese models. It is also known for its fuel efficiency. But these attributes are not really applicable to its bigger and also luxury models. The warranty provided by the company is also its strength. The advantage of being a part of a large conglomerate is also a strength. The company has a strong research division also. It also has a strong dealer network. The fact that the company is appreciated in quite is proven by the fact that it currently holds fifth place in the Kuwaiti Market. Four years back, its place in the market was 17th. (Hyundai eyes No 4 slot in Kuwait market, Velina Nacheva, Business News, Kuwait Times, 2007).
  • Weaknesses: The cars are only considered to be average when compared to the best in their class. This was according to the perceptions of consumers based upon the J D Power Surveys, which is considered to be the world standard for such consumer surveys. The rating given to the company was just average for the following criteria namely, overall quality, overall quality – mechanical, body & interior quality – mechanical, and features & accessories quality – mechanical. The company is also weak in the diesel car segment even though this might not be a factor in Kuwait.
  • Opportunities: Hyundai has two strengths namely price advantage and fuel efficiency. This should be taken up as an opportunity. For Kuwait, the low cost of fuel may not be an opportunity as far as fuel efficiency goes. The market in Kuwait is highly price sensitive and this is an opportunity to take up because of the price advantage.
  • Threats: The high level of competition is the biggest threat. The South Korean economy may prove to be unstable because the country went through a financial crisis during the last decade which resulted in high inflation and the closure of many companies. This is applicable to all South Korean companies. Government policies may prove to be disadvantaged. But this is more so for American companies, because the country’s foreign policies may make all things American unpopular. But Kuwait has good relationships with both Japan and Korea and hence may not be a big threat.

KIA Motors

  • Strengths: The main advantage is the basic price and the running costs, both of which are low. Moreover, the models give good mileage and this is advantageous since the cost of fuel is rising. Its cute appearance and style are also an advantage. Being now a part of the Hyundai group is also an advantage for the company. The share of KIA in Kuwait is now 3.4% according to their official dealers in the country and has been steadily growing over the years. The company had sold about 2800 cars in 2006 which jumped to 3400 the next year which shows that perception about the car is changing. (Kia popularity grows in Kuwait, CNN, January 2008).
  • Weaknesses: The main weakness is its quality in comparison with other carmakers. KIA Motors According to the J D Power Survey, the company only has an average rating in overall quality, overall quality – mechanical, body & interior quality – mechanical, and features & accessories quality – mechanical. It has a below-average rating in powertrain quality – mechanical. The site Consumeraffairs.com says that the car has too many problems to begin analysis and given a list of complaints by dissatisfied customers.
  • Opportunities: In a rising fuel price scenario, the company’s low cost of running should be made use of. This might not matter with regard to Kuwait since petrol is quite cheap in the country. But the country is highly price conscious and should take advantage of this factor. Focusing on, the middle and lower middle income group, college students, choice of second car etc are also opportunities. It should also make more use of the expertise of its parent company, Hyundai. Even with the car’s shortcomings, it is ahead in consumer perception compared to models like Suzuki, Mitsubishi, Chrysler, Dodge, Jeep, Mini, etc.
  • Threats: The biggest threat is from within the company itself because of the poor quality. Competition is also another area of concern. New low priced cars like the world’s cheapest car (India’s Nano made by TATA Motors to be launched later this year) will also be a threat.

Nissan Motor Corporation

  • Strengths: This famous Japanese model is a much respected player in the automotive sector. The company gives a lot of focus on research, technology and manufacturing process (Total quality management). The company also conducts a lot of programs for managerial development within the organization. The strategic partnership with Renault of France is also one of its strength. The two can have a symbiotic relationship with reference to technology and research.
  • Weaknesses: The JD Power Survey does not give much quality to Nissan also. The ratings were just average across all the criteria given in the above two sections (on Hyundai and Kia). Due to this, the criteria are not repeated here. The company had bad publicity in 2004 along with losses due to product defects. “In 2004, Nissan recalled more than 2.5 million cars worldwide and more than 300 million in Europe alone, due to an engine defect”. (Product recalls, Weaknesses, Page 11, Matt Woolley, Siang (Christine) Low, Joel Irwin and Roslyn Haynie, Nissan in Europe). This has led to low brand image especially in Europe, though the company is coming out of it slowly. Like Hyundai, Nissan is poor in diesel technology. It is also not a low cost car like Hyundai and Kia which is disadvantageous in a price sensitive market like Kuwait.
  • Opportunities: Nissan and Renault share 60% of the components that are being made by both companies. This is also the case with raw material suppliers. This ratio, especially the latter could be increased leading to economies of scale. Its distribution network is also not very strong especially in Europe. The company has been having a steady 15% share in the market place in Kuwait.
  • Threats: The main threats faced by Nissan are quite the same as faced by all car makers in Kuwait namely, saturation and competition. Government policies may not be much of a threat. The uneasy conditions of war and terrorism in the Gulf region may also be potential threats. These threats are common to all car makers.

Toyota Motors

Toyota is the top brand in the world in terms of its quality, durability, luxury and other standards. It has also earned a reputation of having the highest resale value compared to the rest of its competitors, that means it has got less reported the lowest problem incidences for more than 20 years. Toyota has been the number one selling brand in Kuwait for the last 10 years. It has got the largest market share and it has left behind all its competitors. It is importing vehicles to Kuwait for more than 53 years.

The major Toyota models includes Yaris Sedan, Corolla, Matrix, Camry, Camry Solara, Prius, privia, Venda, Avalon, Prado, Innova, Fortuner, Land cruiser, FJ Cruiser, Prado Etc. Fast and inexpensive production is one of the major strengths of the Toyota motors. Other strengths of Toyota Corporation are that the company is providing right mix of products for the market it is serving. It has also got a strong industry position, which is based on a number of factors like expanded product range, targeted oriented marketing, dedication to the lean manufacturing system and quality products. It is the most trusted brand name and is utilizing the hybrid technology to maintain its brand name. The company is trying to putting new models into the market each year under low cost, which allows the company to stay in the top position. The company is also dedicated to manufacture vehicles that suits for both the private and commercial users. The company has adopted many quality management techniques and effective inventory management techniques so as to maximize its profit. The company has its own family brand name, which is its greatest strength and also it is adopting its own specific marketing techniques to satisfy the customer needs. But the weakness lies in the fact that being large company, it could not effectively adapt according to the changing political and economic conditions of the country in which it is operating. The steady movements in the exchange rates also affect the market of Toyota. Toyota has to maintain much efficiency in retaining its operational efficiency. It has to invest huge amounts in expensive fixed costs, as well as in training and also in retaining the existing labor force. Because of its huge investments, if the industry experiences a recession, the company could see over capacity. On the other hand if the industry experiences a expansion, the company will probably be missing out some potential sales due to under capacity. There are many opportunities to Toyota. The company has to target the urban youth market. The company has recently introduced its new model called Aygo, which is intended to attract the youth market and also attempts to capture the culture in the very competitive market. The model is very unique and convertible, with thin market segment and narrow margins. It has the status of manufacturing environment friendly vehicles. One of its modal called Prius is based on advanced technology developed by the organisation itself. The huge rise in the oil prices has increased the sales of advanced fuel efficient cars and new hybrid vehicles. Toyota has also sold its technology to its competitors and earned huge profit. Such initiatives will definitely increase the interest and investment of Toyota in hybrid R&D. Product recalls are always a problem for the company. It has the problem of recalling its 88000 sports utility vehicles and also pick up trucks due to defects in the suspension system. The recall sold will cost heavy burden on the company. It also faces huge competitive rivalry in the car market, which increasing day by day. Many new entrants are coming from different parts of the world like China, South Korea and Europe. Due to tremendous increase in the prices of the raw materials such as rubber, steel and fuel, the company is facing adverse situations and slow downs. These are the major impending threats for Toyota.

Mitsubishi Corporation

Mitsubishi Motor Corporation is employed in the manufacturing and marketing of the automobiles. It is one of the fastest growing motor industries in the world. The highly dedicated team of workers is the greatest strength of Mitsubishi also it tries to maintain their standard in their production of each model. They have produced a wide range of motor vehicles for a varied section of people and also for different age groups. They always committed to maintain high quality, performance and also come up with strong back up. It is contributing the highest available technology at the most reasonable price to their customers. They also put forward a back to back warranty program for each vehicle they manufacture. They also provide a life time dedicated customer support service also. Their each model is better than the old models. It has also established a globally competitive and distinctive brand name and because of this it has achieved the highest quality across the whole value chain. Their major opportunities include introducing and maintaining high standard for the customers at the appropriate timing by quality gate system. They are also trying to improve the quality in terms of environmental friendliness, fuel efficiency, lower emission and recycling. It also plans to improve the management efficiency by enhancing efficient business operations and also by adopting efficient supply chain management by applying IT infrastructure. It also face the threat of economic and financial recessions.

Suzuki Motor Corporation

  • Strengths: Suzuki is also a car maker known for its small and medium sized cars. This segment is one of its main strengths. The company has a well established R&D division and all its models are highly advanced technically. The company has the ability to cater and differentiate its products according to each market it operates. The brand has a strong presence in Kuwait and is used by several government departments like Ministry of Electricity and Water. It is also famous for its off road SUVs.
  • Weaknesses: Even though the company has several mid sized and large models, they are not very well accepted. Its main market is limited to the small car segment. The JD Power survey also gives it below average consumer perception on all the criteria mentioned in the above. The only rating where it gets average is the body and interior quality criteria.
  • Opportunities: Like Kia and Daihatsu, the company can focus on its small car segment for growth. It can follow the same policies suggested for the above mentioned models. The company has the ability to differentiate its products and should continue to do so in the Kuwaiti market also.
  • Threats: Like all other models, competition and saturation are the main threats.

Daihatsu Motor Corporation

  • Strengths: The biggest strength of Daihatsu is that it owned by the one of the best and the world’s biggest car manufacturers namely Toyota. Customers can expect the same commitment to quality and technology as can be expected of a Toyota car in the case of this brand also. One of the most important strength is the number of features and accessories in all its cars and that too without paying a high price. “For example, in the case of the Daihatsu Charade EL, you get a surprising array of goodies including twin airbags, electric and speed-sensitive power-steering, height-adjustable steering wheel, electric front windows and door mirrors, radio/CD player, ABS with electronic brake force distribution, immobilizer, central locking, split/ folding rear seats and head restraints front and back.” (Stewart Smith, Evening Chronicle (Newcastle, England), 2004, Daihatsu Charade 1.0 EL, BNET).
  • All this available at only around 8000 USD. Providing so many facilities in a small sized car is definitively a strength for the company. Customers can have the safety and the feel of all these accessories at a reasonably low cost. A medium sized or large car will cost much higher for similar features.
  • Weaknesses: The main weakness with the brand is that it is known for the small and compact car it manufactures. Many Kuwaitis like big models with all the luxury accessories which Daihatsu cannot provide. In this regard, the company can only provide the off-road vehicles that are also loved by customers in Kuwait. Moreover, there have been observations that its engines are quite noisy and fail to catch up with competitors on the performance front. Moreover, the brand is not well-known as the other ones that is being reviewed here. A search for related literature gives very little information of the brand with regard to the Kuwait market. In fact, there is practically no information on the market share enjoyed by the brand in the country. It can be assumed that Daihatsu is not a very popular brand in the country. But it can be seen that the product is very popular in other Middle East countries like the UAE. Focusing on a particular segment (here small and compact cars) can provide the benefits of specialization and hence quality. But the company is unable to provide products catered for the mid range and large car segment. This will restrict its market share to a particular group of customers only.
  • Opportunities: The Company can turn its weaknesses into opportunities. Marketing the product along with be features that go with small cars is one option. Like in the case of Kia, it should focus on the middle class segment. The lower middle class segment may find the product too costly. It can also be marketed as a second car for a family. The advantage of parking in small places, easy driving for women drivers etc should be promoted.
  • Threats: As with all other brands the biggest threats are competition and saturation. Moreover, the company will find itself difficult to make inroads into the Kuwaiti market since it is not very popular in the country. For a small car, pricing is on the higher side when compared with similar models. In a price sensitive market like Kuwait, it will be difficult to make a mark. So, it can only tap into a smaller segment of the small car market. Being a Japanese car, it faces only the same threats as the other models discussed with regard to government policies.

Comparison of other models with Daihatsu

It can be seen that the segment that is relevant here is the small car and off road (SUV) segment. As mentioned earlier, Daihatsu specializes in this segment. In such a case, its main competitors are Kia and Suzuki. More direct competition is from Kia, due to its specialization (in this segment), its low price and low running costs. Daihatsu cannot compete with Kia on its price, but is technically more advanced. It also has many more features and accessories on all its models when compared to Kia and Suzuki. Suzuki is a stand alone company where as Kia is backed by Hyundai and Daihatsu is backed by Toyota. The Toyota backing gives Daihatsu an huge advantage over Kia as well as Suzuki.

Steps to increase sales

It can be seen that Daihatsu has a comparatively poor presence in Kuwait. It also has only limited range of products. Many steps to increase market presence have already been given in the opportunities section of the company SWOT analysis. Other than that, the company should begin to advertise its presence in the market more. Road shows, participation in auto expos should be increased. Its relationship with Toyota should be given maximum publicity. It should focus solely on potential buyers of a small car. In the case of Daihatsu, they include the middle class, well-off students and young employees, ladies, and families who might require a second car. The company should also differentiate (as it is doing now) its products by incorporating as many features and accessories on its models. Features (airbags) which are not usually found on such small cars should be given publicity. The idea that even small vehicles are safe for its occupants should be present in all its advertisements and promotions.

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It will be difficult to make a strong presence for Daihatsu in a saturated market like Kuwait. It can only do this by careful planning and a slow, but steady growth. But given the company’s experience and its Toyota backing, the brand has all the potential to make a much larger presence in the Kuwait automotive sector in the future.

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IvyPanda. (2022, July 29). Japanese Carmakers in Kuwaiti Automotive Sector. https://ivypanda.com/essays/japanese-carmakers-in-kuwaiti-automotive-sector/

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"Japanese Carmakers in Kuwaiti Automotive Sector." IvyPanda, 29 July 2022, ivypanda.com/essays/japanese-carmakers-in-kuwaiti-automotive-sector/.

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IvyPanda. (2022) 'Japanese Carmakers in Kuwaiti Automotive Sector'. 29 July.

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IvyPanda. 2022. "Japanese Carmakers in Kuwaiti Automotive Sector." July 29, 2022. https://ivypanda.com/essays/japanese-carmakers-in-kuwaiti-automotive-sector/.

1. IvyPanda. "Japanese Carmakers in Kuwaiti Automotive Sector." July 29, 2022. https://ivypanda.com/essays/japanese-carmakers-in-kuwaiti-automotive-sector/.


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IvyPanda. "Japanese Carmakers in Kuwaiti Automotive Sector." July 29, 2022. https://ivypanda.com/essays/japanese-carmakers-in-kuwaiti-automotive-sector/.

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