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Toyota-Suzuki deepen partnership with cross holding of up to 4.94%

The two companies first began considering business partnership in October 2016 and since then have continued to consider specific details

Sumant Banerji        Last Updated: August 28, 2019  | 15:47 IST
Toyota-Suzuki deepen partnership with cross holding of up to 4.94%

Japanese auto majors Toyota and Suzuki Motor Corporation on Wednesday decided to enter a capital alliance agreement to deepen a collaboration that started in 2016, wherein Toyota will acquire 4.94 per cent stake in Suzuki valued at 96 billion yen, while Suzuki will buy a much smaller stake in Toyota worth 48 billion yen. As per shareholding on March 31, 2019, Suzuki's investment in Toyota would give it a 0.21 per cent stake as of today.

The companies said the decision has been taken "to establish and promote a long-term partnership between the two companies for promoting collaboration in new fields, including the field of autonomous driving".

The two companies first began considering business partnership in October 2016 and since then have continued to consider specific details. On March 20 of this year, the companies announced that they would begin specific considerations in order to engage in joint product development and collaboration in production, in addition to promoting the mutual supply of products, by bringing together Toyota's strength in electrification technologies and Suzuki's strength in technologies for compact vehicles.

The tie-up has widespread implications for Maruti Suzuki India, India's largest carmaker where Suzuki is the majority shareholder. The deepening of the ties between the two companies in Japan is already evident in closer cooperation between Maruti and Toyota's Indian subsidiary, Toyota Kirloskar Motor Ltd. The two companies have already entered an agreement of cross badging of products like the Baleno and Brezza from Maruti and Corolla from Toyota. The first of them, the Baleno, was recently rebadged and launched as the Glanza by Toyota. 

"The execution of the capital alliance agreement is a confirmation and expression of the outcome of sincere and careful discussions between the two companies, and it will serve for building and promoting their future partnership in new fields," the companies said in a joint statement. "Separately, the automobile sector is currently experiencing a turning point unprecedented in both scope and scale, not only because of enhanced environmental regulations, but also from new entries from distinct industries and diversified mobility businesses. The two companies intend to achieve sustainable growth, by overcoming new challenges surrounding the automobile sector by building and deepening cooperative relationships in new fields while continuing to be competitors, in addition to strengthening the technologies and products in which each company specialises and their existing business foundations."

"Specifically, to take up challenges together in this transitional era, the two companies plan to establish and promote a long-term partnership between the two companies for promoting collaboration in new fields, including the field of autonomous driving," it added.

This is the second time Suzuki is attempting to forge an alliance based on cross holdings with another major automaker. Suzuki had tried to forge an alliance with Volkswagen Group in 2009 and the latter had picked up a 20 per cent stake in the Japanese firm as well. But the alliance was short-lived - it lasted less than 2 years, and imploded spectacularly as efforts to cobble joint projects failed leading to mutual recriminations and breached contracts. A four-year dispute that was ultimately settled by the International Chamber of Commerce led to a bitter divorce in 2015.

Suzuki's need for technology as the global automotive industry braces for all round disruption due to connected, autonomous and electric car technologies is evident but its tentativeness with the partnership with Toyota was a result of the hangover from Volkswagen. Wednesday's tie-up signals the end of that hangover.  

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