Business Today

The Japanese Handshake

Suzuki ropes in Toyota to fill the gaps in technology in exchange for market access.
By Chanchal Pal Chauhan   Delhi     Print Edition: March 12, 2017
The Japanese Handshake

The latest marriage in the global automotive industry, with Japanese rivals Toyota Motor Corporation and Suzuki Motor Corporation forming a partnership, will benefit both. While Suzuki, Japan's fourth largest auto company will gain from their joint research, Toyota, the world's second biggest carmaker, will get better access to the Indian market.

Toyota was the world's biggest auto company till it lost the position to Volkswagen only last year. It remains a global frontrunner in innovations relating to hybrid vehicles and automated driving, but despite being in India for years through its joint venture Toyota Kirloskar Motors (TKM), it has failed to make a sizeable impact. Its market share, led by its Etios brand of both sedan and hatchback, is a mere 4.7 per cent. In contrast, while Suzuki's R&D is modest by global standards, its India market share through Maruti Suzuki India Ltd (MSIL) is more than 10 times that of Toyota's at 48 per cent. The tie-up is thus likely to see a new generation of powertrains and low emission vehicles being built by the joint research of the two giants, as well as MSIL's entire range of cars gaining from Toyota's technology. In turn, Toyota will get fresh insights into small car making and marketing from Suzuki, along with - at some later stage - access to MSIL's extensive dealership and service centre network to expand its India reach.

So far, both Toyota and Suzuki have been guarded in spelling out the extent of their partnership. "With an aim to jointly contribute to resolution of social issues and sustainable growth of an automobile-based society, TKM's parent company, Toyota, has signed an agreement with Suzuki to begin examinations for business partnership in areas such as environmental technologies, safety technologies, and information technologies," said Akito Tachibana, Managing Director, TKM, in a statement. "This is aimed at achieving sustainable growth with mutual business interests staying independently competitive in the market." He acknowledged that India was one of the markets covered by the deal.

Analysts are convinced about the efficacy of the deal which both Toyota President Akio Toyoda and Suzuki Chairman, Osamu Suzuki personally played critical roles in stitching together. "It is a positive move, as it combines Toyota's technology prowess with the strong low-cost car capability of Suzuki, especially in India," says Wilfried G Aulbur, Managing Partner India for Roland Berger, a global strategy consultancy firm. "It should be feasible from a cultural perspective, too, since both companies are Japanese, and will build a solid future." Amit Kaushik, Managing Director, India, at US-based consultancy Urban Science, was also upbeat about the partnership's impact on India. "It will play a crucial role in India as it will consolidate both the entities," he said.

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