Toyota Motor Corporation and Suzuki Motor Corporation put a number of rumours to rest when they announced that formal talks relating to a possible partnership will indeed begin soon.
Suzuki (through its majority stake in Maruti Suzuki India) has spent more than 30 years building a distribution and service network in India, along with a massive market share, and has also established itself as the most reliable motor vehicle manufacturer in the country. Maruti Suzuki’s close-knit network of distributorships and market penetration is the biggest asset Toyota could purchase in the Indian market, which it has failed to effectively penetrate.
Despite accounting for nearly half the total cars sold in the country, Maruti Suzuki has lost significant ground to Toyota in the fields of Research and Development (R&D), automobile technology, IT, and green vehicle technologies. Toyota, on the other hand, is at the forefront after having invested heavily in artificial intelligence, driverless technology, and emission reduction.
Both companies could cover up serious deficiencies in each other’s’ business models through a partnership and sharing of ideas, business practices, technology, and distributor networks. Suzuki Vice Chairman Yasuhito Harayam has stated that the company would be “happy to share” knowledge of lessons learned from their experience in emerging markets, especially India, with Toyota, in a mutually beneficial partnership.
Suzuki was tied up with Volkswagen AG until 2015, when the latter severed business ties after accusing Suzuki of violating the terms of the agreement because of Suzuki’s diesel engine deal with Fiat Motors. Since then, reports indicate that Suzuki has been on the search for a bigger partner who could trade technology and innovation for distributorship and market knowledge.
Toyota, through its small-car manufacturer Daihatsu, aims to capture at least 10% of the Indian passenger vehicle market by 2025. The company expects that entry-level vehicles built by Daihatsu (without all the bells and whistles of bigger cars) will be key to achieving this goal. Reports indicate that Toyota will purchase the remaining stake in Daihatsu soon.
Suzuki has already purchased Hybrid Technology from Toyota, but experts speculate that the amount of technology that Toyota will eventually share will be limited, given the latter’s relations with Daihatsu.
Toyota could use information gleaned from exposure to Maruti Suzuki’s wide distribution area to build and market small, efficient, and reliable cars which are more suited to Indians’ specific needs.
India is on track to becoming the world’s third largest automobile market by 2020 and players are scrambling to get their ducks in a row.