Toyota and Suzuki – what brought them together?

Toyota and Suzuki want to get into bed together. The reasons stated are to explore the possibilities of working together in areas of environment, safety, IT and regular automobile R&D. This has many puzzled, as on the face of it, the two Japanese carmakers don’t seem to be very compatible. Toyota, the world’s number 1 manufacturer, has very little to gain from this partnership, as it possesses technology and products across various segments, including small cars with Daihatsu, a company it recently bought out fully. So what in the world brought them together?

The gains for Suzuki from this partnership are quite clear. It may be doing well in the small-car segment, but it lags behind in the larger and more advanced ones. The car manufacturer also has no robust programmes in the areas of hybridisation, electrification or autonomous driving. These areas are pegged to be the future of mobility. The announcement too, indicates this, stating, “In the face of the advanced and future technology R&D field, Suzuki is increasingly feeling a sense of uncertainty”. Thus, the alliance will bring Suzuki a partner who will provide the much-needed future readiness.

Toyota’s gains however, aren’t that clear. It claims to be behind competitors in North America and Europe when it comes to the establishment of standardisations and partnerships with other companies. But Suzuki doesn’t really excel in these areas either. Its US operations have been reduced to only parts and warranty service for units on the road. Its partnerships too, aren’t anything to write home about, with Suzuki recently going through a messy separation from VW. Thus, Toyota’s gains are beyond what is stated.

With Daihatsu, Toyota has small cars addressed, but low-cost cars are a different matter. Signalling Toyota’s interest in this area, the announcement had a clear nod to Suzuki’s prowess when it comes to price-competitive vehicles. With its rival Nissan demonstrating the benefits of a partnership (Renault-Nissan) and frugal engineering, Toyota could use a leg-up in this area.

The partnership could also open up the Indian automobile market to Toyota, the keys to which are with Suzuki. Toyota recently made public its intent to bring Daihatsu to India, but also stated in the same breath that any Daihatsu car would take a while as there is a lot of grounds-up work to be done, including working with vendors and establishing a deeper network.

While cars like the Innova and the Fortuner have been a success, Toyota is aware of its failure to crack the lower cost-driven segments. The Etios proved to be a misadventure in low-cost engineering. So, frugal engineering and the Indian automobile market could be the big carrots for Toyota in this deal.

On the whole, the future of automobiles rests in two key areas– alternate propulsion and autonomous drive systems for developed markets, and frugally built products for developing economies. And it is these two areas in which Toyota and Suzuki have complementary strengths and that could be enough to make this partnership work.