Toyota Motor it seems is tightening its belt up to gain a stronger hold in emerging passenger car markets like India. Now Toyota and Suzuki have decided to supply cars to each other starting next year. According to an industry research agency, emerging markets will comprise of 60% of total car sales in the world in 2021. However, only 40% of Toyota's total sales came from these markets last year, and it enjoys under 10% of the market in countries like India, Russia and Brazil. While sales in US and Japan have levelled off, Toyota needs a way to gain momentum in markets like India. So, what does supplying cars to and from Suzuki will mean for it?
Suzuki leads the Indian passenger car market through subsidiary Maruti Suzuki India that holds almost half of the Indian passenger car market share. Suzuki will supply Toyota Motor with 30,000 to 50,000 units of the Maruti Suzuki Baleno and Vitara Brezza compact SUV.
In return, Toyota will supply Suzuki with about 10,000 units of the Corolla in both hybrid and petrol models. This mutual supply of vehicles will operate on an original equipment manufacturing basis. We may see Maruti Suzuki cars with slight cosmetic changes with Toyota badging in the near future and vice versa for Toyota cars as well.
Details on each model, such as the schedule of the start of supply, number of supplied units, vehicle specifications, and supply pricing, will be considered at a later stage. The vehicles will be sold by respective subsidiaries of Toyota and Suzuki based in India through their sales networks. By challenging and competing with each other with the goal of mutual improvement, Toyota and Suzuki aim to invigorate the Indian automotive market to further enhance their respective products and services to be offered to customers.
Toyota's market share in India stood only at 3.5% last year. The brand also designed a car specifically for the Indian market, the Toyota Etios but it didn't grow very well with the audience. Toyota can now hope a hike in sales with the addition of Suzuki cars.
All automakers alike are pushing towards the development of clean emission cars with the Indian government announcing its plans to have electric vehicles make up 30% of the nationwide fleet by 2030. Hence, Suzuki will also be able to use hybrids from Toyota as offerings of green cars. Besides this, Toyota and Suzuki also plan to introduce jointly developed electric vehicles by 2020.
Toyota and Suzuki partnership also highlights Toyota's shift away from its philosophy of self-reliance as competition intensifies and costs pile up for developing technologies like self-driving cars. The company spent an estimated $22 billion on research and development and capital expenditures for the year ending March 31, a 40% increase from five years earlier.