Toyota will make Vitara Brezza at its plant in Bidadi from 2022 and part of the investment will also go on modifying the plant to manufacture Brezza.
By Pritish Raj
Japanese car manufacturer Toyota is planning to source more models from Maruti Suzuki for the Indian market, apart from the four vehicles already announced by the two companies as part of their global tie-up, people aware of the development have said. On the other hand, Suzuki — the Japanese parent of Maruti Suzuki — will be relying on Toyota for the large-sized vehicles (MPVs and SUVs), considering the latter’s expertise in developing them and their success rate.
The vehicles sourced from Maruti Suzuki will be below Rs 10-lakh category and include hatchbacks and sedans, a segment where Toyota is not very actively present, one of the persons said, adding Toyota will invest Rs 1,500-2,000 crore in either re-badging or converting those vehicles into hybrid version. The vehicles will be used by Toyota for the domestic as well as the export markets and the hybrid versions will also be shared by Maruti Suzuki.
“The move is a part of both the companies’ strategy to maximise profitability and ensure economies of scale. The agreement was done with a long term goal and will span over 5-7 years which will help in attaining a sustainable mobility business,” the person told FE.
On being contacted, Maruti Suzuki said, “There is nothing new to add currently on Toyota-Suzuki announcement.” Toyota Kirloskar Motor, on the other hand said, “We are unable to comment on any future product plans”.
As part of the agreement between the two companies earlier, while Maruti Suzuki will supply its four models — Baleno, Vitara Brezza, Ciaz and Ertiga — to Toyota, the latter will provide Suzuki its hybrid electric vehicle (HEV) technologies in India through local procurement of HEV systems, engines and batteries. The two carmakers will jointly develop a new Toyota C-segment multi purpose vehicle (MPV) that will be supplied to Suzuki.
Toyota will make Vitara Brezza at its plant in Bidadi from 2022 and part of the investment will also go on modifying the plant to manufacture Brezza. The first of the cross-badged car, Glanza, was launched by Toyota last month, which is a re-badged version of Maruti’s Baleno.
Toyota, which is present in India through a joint venture with the Kirloskar group, has had a runaway success with its large-sized vehicles like Innova and Fortuner. However, the company’s overall market share hovers around 4% due to lack of enough products in the hatchback, sedan and compact SUV segment. Besides, products like sedan Etios and hatchback are also nearing the end of lives as they are likely to not comply with the future safety and emission norms. Maruti Suzuki, on the other hand controls over half of the passenger vehicle market, but does not have a high-end SUV in its portfolio.
Analysts said the deal will be beneficial for Toyota as it will be able to sell more number of cars in India at a low-cost model which Suzuki has. Besides, capacity utilisation of Toyota will improve significantly. On the other hand, hybrid vehicles supplied to Suzuki will help cost-conscious firm to lower development costs.
Analysts at Jefferies said access to Toyota’s technology will be key to future-proof Maruti’s long-term prospects, particularly in the electric vehicles segment. Analysts at Motilal Oswal believe the alliance addresses the long-term sustainability issues of Maruti by getting access to EV and hybrid technologies.
According to VG Ramakrishnan, managing partner, Avanteum Advisors, for Suzuki it’s a question of survival and to stay relevant in the market while for Toyota it is about getting scale in India. “India and Japan are the only two big markets for Suzuki, while Toyota is a global brand so the former needs the latter more than the latter does,” Ramakrishnan said.