An alliance between Toyota Motor and Suzuki Motor could be a boon to both sides, helping the former gain ground in emerging markets such as India and giving the latter the engineering needed to compete in an increasingly high-tech industry.
Can’t go it alone
The two automakers said Wednesday they were discussing collaboration on environmental, safety and information technology.
Although Toyota President Akio Toyoda told a new conference that the idea of an alliance came together in just two business days after Suzuki Chairman Osamu Suzuki got the ball rolling, there is more to the story. Suzuki’s next partner had been the subject of speculation since August 2015, when the Japanese maker of economy cars ended a capital and business relationship with Germany’s Volkswagen over management conflicts.
Though Chairman Suzuki had said publicly that his company would look to remain independent going forward, another senior executive had acknowledged that collaboration was “necessary” in some fields. Even in India, a successful market for Suzuki, environmental regulations are growing tougher, making investment in technology like hybrid drive systems essential. Rising incomes have also stoked demand for higher-end vehicles in such countries.
Finding a big automaker ally was seen as essential for Suzuki to ensure a presence in self-driving cars. While a Toyota or a Volkswagen has the financial strength to counter the challenge posed by Google and other tech giants in this field — Toyota’s annual research and development budget comes to around 1 trillion yen ($9.59 billion) — Suzuki, which spent just 130 billion yen on R&D in the year ended March 31, hardly stands a chance alone.
Toyota Motor announced on Sunday that it will suspend most car production across Japan after a crucial part of its supply chain was cut by the two earthquakes which devastated the southern Japanese island of Kyushu.
The automaker will halt production at all of its major assembly lines at its four directly-run car plants, and will suspend production in stages at other group companies. According to a Toyota announcement, five assembly lines will stop at its directly-owned factories in Takaoka, Tsutsumi, and Tahara from April 19 to 23, followed by two production lines at Tahara and Motomachi from April 20 to 23. This means that all seven of Toyota’s directly-operated mass assembly lines will be shut down. Group companies will also suspend most of their production between April 18-23, shutting down most of the entire Toyota group in Japan. It is expected that as many as 50,000 vehicles will be lost in the shutdown. Production affected includes popular models such as the hybrid Prius, the Crown, the Land Cruiser and Lexus. “Decisions regarding recommencement of operation at plants in Japan will be made on the basis of availability of parts,” the company said in its announcement.
Toyota Motor Corp is considering shutting all its domestic car manufacturing plants for at least a week from Feb. 8 due to steel shortage following an explosion at its group firm Aichi Steel this month, TV broadcaster TBS News reported on Friday night.
The heating furnace at Aichi Steel’s Chita plant in central Japan exploded on Jan. 8, denting production of special steel parts, the company has said, adding it aims to resume operations in March.
Toyota Motor could not be immediately available for comment.
Kyodo News said Toyota would stop overtime next week at all its production plants in Japan and added that a production halt was possible from Feb. 8.
Toyota manufacturers around 13,000 to 14,000 vehicles a day in Japan, Kyodo said.
Toyota Motor and Suzuki Motor have begun talks on a tie-up, looking to take advantage of each other’s know-how and capitalize on demand for compact cars in India and other emerging economies.
Suzuki, which sells 2.79 million vehicles a year globally, drives Japan’s minicar market alongside Toyota group company Daihatsu Motor. Its strengths include low-cost vehicle production. It boasts a 40% share of the Indian passenger-vehicle market, a major profit source. Suzuki’s robust sales network, built up over three decades, would likely be a major asset to Toyota as it expands its Indian operations.
While Toyota set up a production arm in India in 1997, the results have been lackluster, with its market share at just 5% or so. The automaker aims to use the partnership with Suzuki to gain a firmer foothold in areas of greater Asia outside its existing stronghold, which includes Thailand and Indonesia.
Toyota tops the global automobile market with annual group sales of some 10 million vehicles. It is a leader in safety technology, including self-driving cars, as well as eco-friendly vehicles such as the Prius hybrid and Mirai fuel cell car. Environmental and safety regulations are expected to tighten worldwide. With integration of information technology becoming essential to the industry, Suzuki likely aims to take advantage of Toyota’s next-generation technology.
Suzuki and the Toyota group will discuss the potential partnership from a variety of angles, with cross-shareholdings a possibility.