TOKYO -- Toyota Motor and Suzuki Motor have begun talks on a tie-up, looking to take advantage of each other's know-how and capitalize on demand for compact cars in India and other emerging economies.
Suzuki, which sells 2.79 million vehicles a year globally, drives Japan's minicar market alongside Toyota group company Daihatsu Motor. Its strengths include low-cost vehicle production. It boasts a 40% share of the Indian passenger-vehicle market, a major profit source. Suzuki's robust sales network, built up over three decades, would likely be a major asset to Toyota as it expands its Indian operations.
While Toyota set up a production arm in India in 1997, the results have been lackluster, with its market share at just 5% or so. The automaker aims to use the partnership with Suzuki to gain a firmer foothold in areas of greater Asia outside its existing stronghold, which includes Thailand and Indonesia.
Toyota tops the global automobile market with annual group sales of some 10 million vehicles. It is a leader in safety technology, including self-driving cars, as well as eco-friendly vehicles such as the Prius hybrid and Mirai fuel cell car. Environmental and safety regulations are expected to tighten worldwide. With integration of information technology becoming essential to the industry, Suzuki likely aims to take advantage of Toyota's next-generation technology.
Suzuki and the Toyota group will discuss the potential partnership from a variety of angles, with cross-shareholdings a possibility.
Suzuki formed a capital alliance with Volkswagen in December 2009 after ending its long-standing partnership with General Motors. But differences of opinion over management control and technology sharing led to international arbitration, which brought an end to the tie-up last September. Toshihiro Suzuki succeeded his father Osamu Suzuki, the Japanese automaker's charismatic chairman, as president last June. Talks had been underway behind the scenes about the company's "post-Osamu" direction.
The company bought back nearly 20% of its outstanding shares from Volkswagen for roughly 460 billion yen ($3.88 billion). It plans to retire a portion of this stock as well as use some of it for new partnerships and other initiatives.
The Toyota group, Volkswagen and GM lead the global auto industry. Peers often cooperate as well as compete, as shown by such arrangements as GM and Honda Motor working together to develop fuel cell cars. An alliance between market leader Toyota and Japanese No. 4 Suzuki would likely have a significant impact on the industry's balance of power.