The Suzuki-Toyota tie up said that they will focus on Electric Vehicles for the Indian market and while most of us just assumed that this would be an independent Suzuki Motor Corp venture in India, the bean counters at Maruti got to work. The result according to report in the Mint says that while Suzuki might be taking all the risks in the matter of EVs it’s likely that Maruti will be reaping all the rewards. The announcement which was driven by the government’s new 2032 Electric switch directive, will see Suzuki Japan form two partnerships, one where it will produce Electric Vehicle batteries in collaboration with Denso and Toshiba, both of whom have years of experience in Lithium Ion technology. The other is with Toyota and this will work to introduce working electric vehicles to India by 2020.
Here’s the peg though, while both partnerships involve tie-ups between Suzuki and other companies, one which actually competes with Maruti in India, Maruti itself has no equity participation in either. Which means that as a result, they face no risk if this does not take off. What Maruti will have, however, is the spoils in case the venture is fruitful, they will have a direct line to in-house developed Lithium Ion battery packs as well as Electric Vehicle platforms from the Toyota-Suzuki partnership. Now while it may seem like a big risk for both the companies involved, but they also stand to gain the most out of this arrangement given the need for EVs arises at the rate requested.
Now, this is the second instance where Suzuki has played a guard role for its subsidiary Maruti, case in point, the Gujrat Suzuki plant is essentially a Maruti manufacturing unit, which is owned entirely by Suzuki. Where Suzuki sells the complete product to subsidiary Maruti at cost price. Thus leaving the high earning sub with a large cash reserve to protect its own interests in the stock market. Reflecting on a growth of 73% and a masterclass in Japanese risk analysis.
