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Toyota and Suzuki to supply cars to each other in India

Japan's No. 1 automaker seeks partnerships to penetrate emerging markets

Toyota Motor and Suzuki Motor plan to release joint developed electric vehicles in India around 2020.   © Reuters

TOKYO -- Toyota Motor will mutually supply cars in India with market leader Suzuki Motor starting in 2019, Nikkei has learned, as the company seeks to build a foothold in emerging markets.

Emerging nations will comprise nearly 60% of global auto sales in 2021, according to an industry research agency. But only about 40% of Toyota's global sales came from these areas last year, and the automaker controls less than 10% of the market in countries like India, Russia and Brazil. As sales level off in the U.S. and Japan, Toyota must find a way to penetrate emerging markets.

Suzuki, which leads the Indian market through subsidiary Maruti Suzuki India, will supply Toyota with 30,000 to 50,000 units annually of its compact Baleno and Vitara sport utility vehicle. Toyota will provide Suzuki with around 10,000 units yearly of its Corolla in both hybrid and gasoline models. This mutual supply of vehicles will operate on an original equipment manufacturing basis.

Toyota's Indian market share was just 3.5% last year while Suzuki's exceeded 40%. In 2010, Toyota released a car designed for emerging markets, the Etios, but the model has not been popular. The automaker hopes to shore up sales of mainstay compact vehicles in India with the addition of Suzuki cars. Toyota also aims to lift local factory operation rates, which are stuck around 50%, by supplying vehicles to Suzuki.

The automakers also are bolstering cooperation on environmentally friendly cars amid New Delhi's push to have electric vehicles make up 30% of the nationwide fleet by 2030. Suzuki will use hybrids from Toyota to expand offerings of green cars. The pair plans to release jointly developed electric vehicles in India around 2020.

Toyota completed a tie-up with Suzuki in February 2017 to foster sales in emerging markets. Toyota said in November that it would procure Indian-made electric vehicles from Suzuki starting around 2020. The latest agreement expands OEM procurement to compact cars and hybrids.

The partnership also reflects a trend by Toyota to 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 2.34 trillion yen ($22 billion) on research and development and capital expenditures for the year ending March 31, a 40% increase from five years earlier.

India ranked as the world's fourth-largest market for new cars last year behind China, the U.S. and Japan with sales of 4.01 million vehicles. The country is expected to surpass Japan in several years.

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