Toyota revs up Daihatsu plans even as pact with Suzuki gains traction

While Toyota and its wholly-owned arm, Daihatsu, are revving up their compact car plans for emerging markets, details of the Suzuki alliance are also expected to be announced soon.

In the process, there could be some interesting implications for India where Maruti-Suzuki rules the small-car market, a segment that has been eluding Toyota for nearly a decade now. How they synergise their strengths and make things work to each other’s mutual benefit is the million dollar question. In mid-October Toyota and Suzuki announced that they were exploring the option of collaborating in R&D. Industry sources believe that this could lead to an equity partnership where the world’s top carmaker will lend a helping hand to its smaller Japanese counterpart in technology.

Should this happen, Suzuki is also expected to reciprocate by sharing its expertise in making small cars at competitive costs. This could help create joint platforms where the two can look at making compact cars for a host of markets. While Toyota is strong in Europe, the US and Asean, Suzuki is the monarch of India’s small-car market.

Of course, nothing has been announced yet but within industry circles, speculation is rife that a big-ticket announcement will happen soon. In the past, Suzuki has entered into alliances with General Motors and Volkswagen but neither yielded the desired results. With Toyota, the company will look at a more durable relationship where the commonality of culture could play a contributing role.

The joint announcement of Toyota and Suzuki happened barely a week after the former made known its intent to work with Daihatsu in emerging markets. It was also during this time that Akio Toyoda, the President and CEO of Toyota, said, “At the joint news conference held with Daihatsu earlier this year, I said that Toyota is not really good at creating alliances. ...However, as the surrounding environment is changing drastically, we need to have capability to respond to changes in order to survive.” Seated with him at the news conference was Osamu Suzuki, Chairman of Suzuki Motor Corp.

Last week Toyota and Daihatsu christened the new company ‘Emerging-market Compact Car Company’, which would begin operations on January 1, 2017. As part of this effort, Toyota’s R&D arm for Asia-Pacific, headquartered in Thailand, will come into the fold of this new entity and baptised Toyota Daihatsu Engineering and Manufacturing Co.

The Indian operations of Toyota do not have an exclusive R&D in place yet, but engineers here worked with their counterparts in Thailand for the recent rebooting exercise of the Etios. Their calibre and skills apparently impressed headquarters in Japan and could now be used for the Toyota-Daihatsu drive.

Daihatsu has operations in Indonesia and Malaysia which will logically be the priority markets. The next step would be to look at Thailand, Taiwan and the Philippines which could be easily serviced, thanks to the Asean Free Trade Area’s cost advantage. India could come next and perhaps there could be some dynamics panning out with Suzuki too.

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