Toyota-Suzuki alliance drives past the failure of others

Tata-Volkswagen and Ford-Mahindra had failed to click in the past.

Tie-ups in the Indian passenger vehicle space have not really worked. Although many of them were announced with great fanfare, they were dissolved in a short span of time. In fact, none of the alliances resulted in a successful product during its tenure.

Whether it was the Mahindra & Mahindra-Renault alliance of 2007, the Tata Motors’ pact with German manufacturer Volkswagen in 2017 or the Ford and Mahindra tie-up in 2019, they failed to ignite the market with any product, and were eventually called off.

The tie-up between Japanese auto majors Toyota Motor Corporation and Suzuki Motor Corporation, in 2017, however, has not only survived but is thriving as it has gone beyond cross-badging of vehicles to now producing compact SUVs, a segment which is currently driving the passenger vehicle market in the country.

Toyota Kirloskar Motor now sells two Maruti Suzuki models in India – Glanza and Urban Cruiser — rebadged versions of the Baleno and Vitara Brezza. On July 1, it unveiled the Urban Cruiser Hyrder, its first midsize SUV for India that has been built jointly with Maruti Suzuki.

Automotive analysts say the Suzuki-Toyota alliance will not only work but will go a long way because of the synergy as well as a shared business culture.

Som Kapoor, EY India automotive, future of mobility leader (consulting), and partner, told FE, “Both are Japanese companies, the tie-up happened at the headquarter level, and most of it is getting implemented in India. Maruti Suzuki doesn’t have full hybrid electric vehicle technology, which Toyota has. Also, Toyota isn’t as strong as Maruti Suzuki in small cars.” According to him, both only have to gain from each other.

Another expert pointed out that earlier automotive partnerships failed due to some disconnect between the partners. “In the case of Mahindra and Ford, the priorities weren’t aligned. Mahindra is traditionally a low-cost manufacturer, and for Ford, the cost of manufacturing was going to be much higher. They couldn’t work out a middle ground. Almost similar was the case with the Tata-Volkswagen tie-up,” he said.

Suman Jagdev, partner, automotive, Praxis Global Alliance, told FE that the success of partnerships lies in its complementarity. “Toyota is clear that this tie-up will help improve its sales in India because it will get access to Suzuki’s extensive after-sales network and be able to provide the ‘Toyota service quality’ at the lower end of the market. This tie-up also brought together Toyota’s strength in electrification and Suzuki’s strength in compact vehicles, and both could produce compact electric cars,” he said. “Essentially, in this case, clearly articulated objectives led to the eventual success of the partnership.”

Toyota Kirloskar Motor launched the Glanza on June 6, 2019, and the Urban Cruiser on September 23, 2020. In almost three years, it has sold more than 110,000 units of both the models put together. Of these, more than 65 per cent Glanza customers are first-time Toyota buyers, and a whopping 95 per cent of Urban Cross SUVs have been bought by non-Toyota customers.

“Both these cars have given TKM an entirely new set of customers, who may not have otherwise entered the Toyota family because TKM earlier didn’t have a car at a price point they could buy,” Tadashi Asazuma, executive vice-president, sales and customer service, TKM, recently told FE.

A Toyota dealer from Delhi-NCR added that even though the Indian customer knows that the Glanza and the Urban Cruiser are rebadged Maruti Suzuki cars, “she is able to enter the Toyota family at a lower price point”.

This partnership is expected to eventually manufacture compact electric cars for India as well as for export market.

Earlier this year, Suzuki Motor Corp confirmed an investment of Rs 10,440 crore in India to strengthen its electric vehicle plan, and will roll out its first electric car built at its Gujarat plant by 2025. This made-in-India electric car will be sold as a Maruti Suzuki as well as a Toyota model in India, along with international markets.

Get live Share Market updates and latest India News and business news on Financial Express. Download Financial Express App for latest business news.

Most Read In Industry Express Mobility
Photos