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
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 has recently come to appreciate the need for alliances as well. The company has long taken pride in self-reliance. But collaboration in the U.S. and Europe between government, academia and industry have given automakers there a lead in creating de facto standards for next-generation automotive technology — a position Toyota covets.
Toyota had a condescending attitude and was poor at making allies, senior executives have conceded over the past year or so, adding that the company had succeeded only in bringing others into alliance against it.
Meanwhile, the market for hybrid vehicles, which the Japanese carmaker pioneered, is not growing as expected. The U.S., China and other countries are already focused on promoting electric vehicles, the next step in environmentally sound driving and an area in which established automakers face stiff competition from newcomers such as Tesla Motors.
Toyota is learning to cooperate. It forged a partnership with Mazda Motor in 2015 to share development costs and advanced technology. Daihatsu Motor — whose capital and business ties with Toyota stretch back to 1967, though they were not as tight as they could have been — finally became a wholly owned subsidiary in August.
Now, through its alliance with Suzuki, Toyota aims to reach farther abroad. “Suzuki blazed a trail on the Indian frontier,” President Toyoda said Wednesday. Toyota wants to learn from its smaller partner’s speed and pioneering spirit in that country, both in terms of technology and how to form “a consensus with society,” he said.
Revelations at Suzuki of improper methods of determining fuel economy for some vehicles kept the partnership with Toyota from possibly coming together earlier this year. The Mazda tie-up, meanwhile, has yet to be fleshed out. On paper, Toyota’s circle of allies is larger than it has ever been. But without speed and determination, it may never reach its full potential.