The Indian Automobile sector is facing a tough year. Sales of automobiles are at an all-time low. Every individual manufacturer is struggling to make a profit. Further, the rise of Electric vehicle usage has compounded their woes. The alliance between Toyota and Suzuki has garnered quite an interest due to these circumstances. Can they together ride through this economic uncertainty?
Maruti Suzuki is one of the leaders in Budget Car sales in India. Toyota Motor Corp is one of the biggest brands in Automobile Segment in all of Asia. Both of these brands came together to form a partnership to collaborate their technologies and cross-brand their models.
Toyota acquired a stake of 4.94% in Suzuki by investing $908 million. Suzuki made an investment of $454 million by buying shares worth 0.22% in Toyota. Based on their cross-brand agreement, Maruti's vehicles like Sedan Baleno, Ciaz, Vitara will be rebranded and launched by Toyota while Toyota's models like Corolla will be redesigned and launched by Maruti.
Suzuki’s Benefit from the Alliance:
With the focus in India turning towards Hybrid Electric vehicles, there will be a lot of new technologies and vehicles developed under this segment in the coming years. Maruti Suzuki gets the technology from Toyota for its design and development of these Electric vehicles.
Toyota also has lots of vehicles in the premium car segment. Maruti doesn’t have much presence in this segment. With the cross-branding of vehicles, Maruti has a chance to make its mark in this segment.
Toyota’s Benefit from the Alliance:
Toyota is a huge brand, but its market share in India is very low. As of now, Toyota's market share is just 5% in the automobile industry in India. Its presence is mainly in the premium car segment. Now, with the help of Maruti, it can increase its market share in the budget segment. Maruti's Baleno has been modified and launched as Glanza by Toyota. Maruti's dealership coverage is pervasive & vast. Toyota can use that dealership to its advantage. Toyota has around 200+ dealership stores, while Maruti has about 2500+ dealership centers in India. Thus, the benefit Toyota gets is immense for its growth in India.
Whom does this partnership favor?
With both Suzuki and Toyota helping each other using this partnership, who does it favor the most? By the looks of it, Toyota is getting more from this partnership in the short-term. Toyota's market share is less in India, and with this cross-branding, it can improve its sales. On the flip side, the share of Maruti might reduce as its vehicles are getting cross-branded.
For Suzuki, this provides an opportunity to use the technology developed by Toyota to design hybrid electric vehicles. It doesn't have to spend millions on building any technology and can use the progress made by Toyota for its research. Currently, various prototypes of electric cars are being tested in India by Suzuki, with the help of Toyota, to figure out the best design suitable for the Indian terrain. By the looks of it, Suzuki gets some benefit in the medium to long term range.
When the alliance was announced by both the players, it was not much welcomed by others. The main reason for that was all such previous partnerships were not successful. Suzuki had partnered with Volkswagen previously in 2009. But that partnership didn't last much, and it ended in 2 years. So, the success of this partnership can be known after some months.