Suzuki and Toyota alliance could see gains in India

On October 12, Suzuki Motor Corporation and Toyota Motor Corporation announced the precursor to a partnership that will allow the two Japanese carmakers to co-develop new environmental, safety and IT technology.

A joint statement said: “With its primary focus on small vehicles, Suzuki has been consistently refining its technologies so as to develop vehicles with high price competitiveness. However, in the face of the advanced and future technology R&D field, Suzuki is increasingly feeling a sense of uncertainty.”

It went on to say that although Toyota has been conducting R&D in environmental, safety and IT technology, it believes that competitors in European and North American markets may be ahead of it when standardising and partnering with other companies for technological development.

Speaking about the deal, Toyota’s president, Akio Toyoda, said: “As the environment which surrounds the automobile industry has been changing drastically, we need to have the ability to respond to changes in order to survive.

“In addition to the R&D which each company is working on individually, it is very important now to have partners who share the same goal and passion.”

“We would like to always keep our doors open for new partnership opportunities, which will contribute to the making of ever-better cars as well as to the development of the automotive industry.”

Suzuki chairman Osamu Suzuki said: “Toyota is industry-leading, and the most reliable company which is actively working on various advanced and future technologies.”

“I am appreciative that Suzuki is able to start discussions with Toyota to explore ideas on a partnership. I first spoke about this possibility with Toyota’s honorary chairman Shoichiro Toyoda, and am very grateful that president Akio Toyoda has also shown an interest."

Likely gains of partnership in India

To understand the potential impact of such an alliance on the India market, Autocar Professional contacted RC Bhargava, chairman of Maruti Suzuki India, for his reaction. However, Bhargava preferred to wait and let some more details emerge on the subject. Moreover, he felt it is too early to respond to a decision that affects Maruti Suzuki’s parent company rather than its Indian subsidiary.

For the last few years, the global automotive industry has been witness to a number of strategic alliances being forged between Daimler, Renault and Nissan as well as Nissan and Mitsubishi. So it does not come as a surprise for Kaushik Madhavan, Head of Mobility, Frost & Sullivan India, who terms it as a win-win situation for both companies.

Key implications from Toyota’s perspective, according to Madhavan, will be gaining access to Suzuki’s biggest market – India. In addition, the carmaker can tap into the network and dealerships of Suzuki in the country through Maruti Suzuki, a well-entrenched player in the local market as well as garnering knowhow behind the small affordable car, which is Suzuki’s USP in India.

Toyota, through its Bangalore-based joint venture company Toyota Kirloskar Motors, has not really been able to penetrate the Indian market with its existing models. Toyota recently bought over small car specialist Daihatsu and is likely to kick off its small-car assault in India in 2018. If the proposed Toyota-Suzuki alliance gets the green light, it could well accelerate the introduction of the small car brand by leveraging Suzuki’s expertise in this domain.

From Suzuki’s perspective, it has limited capability in developing hybrid and electric powertrains while Toyota is well known for its alternative fuel technologies especially with its eco-friendly hybrids – the Prius, Camry and the Corolla. By partnering Toyota, Suzuki gains access to this technology that will help it expand its product portfolio in areas where it did not have prior expertise. Globally, Toyota has a better brand image (it was recently pegged at No. 5 of 2016's best 100 global brands) while Suzuki is known more for its small car platforms, which translates into a good fit.

Furthermore, this likely collaboration will cover R&D in advanced technologies and products and could come at a more opportune moment with BS-VI emission regulations to come into force in 2020 in India along with fuel economy legislation in 2021-22. By October 2017-18, safety norms will also be in place in the country; the alliance is exploring partnership in advanced technologies in environment, information technology and safety where Suzuki will gain from Toyota’s association.

Madhavan clarifies that despite a common development programme, both companies would have differentiated features in their cars but will share technologies and could have common components like engines and gearboxes that would enable both to price their products aggressively much on the lines of Renault-Nissan.

An alternate view is offered by Abdul Majeed, Head of Automotive Practice of PricewaterhouseCoopers India, who says that with a lot of disruption happening in the automotive industry thanks to players like Tesla, Google and Apple, a transformation is taking place in product development. Personal mobility and connected car concepts are fast gaining popularity. Here, the alliance etched between different companies does not necessitate individual investments to be made by one party but instead each can draw on the other’s skill and expertise. With both Toyota and Suzuki looking at futuristic technologies, India could be a key market though sharing of technologies could provide tailor-made solutions for specific markets while cutting costs.

“The technical partnership between Suzuki and Toyota appears to be in line with Suzuki's objective to strengthen its capabilities in the areas of alternative powertrains (i.e. hybrids, electric) where Toyota has years of experience and an established product portfolio. From Toyota's prospective, the technical collaboration would provide access to Suzuki's small car technology. Given the increasing R&D cost, pressure on developing alternative power trains and shrinking model renewal cycles, such alliances will enable OEMs to leverage each other’s capabilities,” says Subrata Ray of ratings firm ICRA Ltd.

Toyota Kirloskar Motors (TKM) maintains that Suzuki first approached Toyota globally for inking this alliance and that the association is not targeted at any particular market but is for a general technology development that would prove useful for both the parties.

N Raja, director and vice-president (marketing), TKM, elaborates that there is an understanding and plan to work together between Suzuki and Toyota on various futuristic technologies. In terms of the probability of Toyota fast forwarding the entry of its small car brand Daihatsu to India with this association, the decision on bringing it will be taken after January 2017 by Toyota. Watch this space.

(With inputs from Autocar UK)