apanese automakers on a bonding spree

When Toyota and Mazda announced their equity alliance in Tokyo recently, it marked yet another case of two Japanese companies coming together.

What is remarkable is that all this has been happening at a rapid pace since 2016 when Nissan took charge of a beleaguered Mitsubishi, which was in the midst of a mileage fudging scam. Old foes, Honda and Yamaha, then decided to team up in a niche area of 50cc scooters while exploring the option of e-motorcycles jointly.

Then came the announcement by Toyota and Suzuki to explore the possibilities of working together in the area of R&D and technology. It is now a Toyota encore, albeit with Mazda, in an equity crossholding deal. All this is a clear indication that a lot is happening within Japan’s automotive ecosystem.

Over the next few months, it is very likely that Toyota and Suzuki will make public the next big step in their partnership which, like Mazda, could be equity-based. By virtue of its tremendous financial muscle and size, Toyota could take the lead in the quantum of investment pretty much on the lines of Mazda where it holds 5 per cent equity to the latter’s 0.25 per cent.

Is too much being read into all this? After all, in the case of Toyota and Mazda, this partnership will be confined to the US in addition to joint development of technologies for electric vehicles and connected cars. Assuming that the blueprint with Suzuki is on the same lines, it could be focused on Asia (and India in particular) where Toyota could benefit from the latter’s cost-efficiencies in manufacturing.

To a section of industry observers, it is no coincidence that Japanese automakers are now rapidly getting into consolidation mode. “Joining hands with another homegrown company gives an added sense of security apart from greater cultural comfort,” says an auto sector executive. According to him, this is perhaps the best way going forward given the rising dominance of China, which is already the world’s largest producer of cars and growing from strength to strength.

Keeping in mind that there is no love lost between China and Japan, the need of the hour is to protect local Japanese automakers and ensure that they do not fall by the wayside. This puts in perspective why it took a Nissan to throw a lifeline to Mitsubishi and keep the family silver intact. Never mind that it was the same Nissan that needed to be bailed out by Renault more than 15 years ago when it was in dire straits and has since ended up being the biggest pillar of support for its European ally.

Suzuki, likewise, is a big player in India and the ASEAN region with plans to grow its presence in Africa and Latin America. Yet, the fact remains that it is quite insignificant in the West, which only reinforces the need for a stronger partner. This reality prompted the company to have alliances with the likes of General Motors and Volkswagen but neither worked according to script.

Suzuki is now exploring the option of teaming up with Toyota and there is no reason why the two will not firm up a robust plan in the coming months. “The global automotive landscape is changing rapidly with connected cars, e-mobility and pressure on car ownership thanks to disruptions like Uber,” adds the auto executive. “In this backdrop, stronger Japanese companies are reaching out to smaller/weaker counterparts to ensure that they remain ahead of the curve.”

Consolidation is the name of the game across the world as in the recent case of France’s PSA Group acquiring Opel. Renault and Fiat, likewise, have benefited from alliances and buyouts while Chinese automakers such as Geely have grown to the next level with acquisitions like Volvo Cars. In the case of the Japanese, it makes more sense to rely on competencies available within the country.

One could always argue that too much is being made out of what could be otherwise perceived simply as just a series of coincidences. Hiroyuki Yanagi, President & CEO of Yamaha Motor, certainly thinks this is the case. During a recent visit to India, he was categorical that there was really no kind of consolidation happening in Japan. “Each of these is a case-by-case issue in my view. As I have already said, harmonisation is the way forward with true competition remaining intact,” he said.

The two were bitter foes in the 1980s whose ‘H-Y’ war is still not forgotten today even while many years have gone by since then. “All this happened over 30 years ago. That was during the old generation management but we represent a new generation that thinks differently,” said Yanagi.

Shinji Aoyama, Honda’s Chief Officer, Regional Operations (Asia and Oceania), who was in India earlier this month reiterated that the alliance with Yamaha would only be confined to the scooter space in Japan. “Our common interest is only for Japan’s domestic 50cc segment, which is very limited in its scope,” he said.

Yanagi said the arrangement with Honda made perfect business sense as the 50cc scooter market was “very limited right now” and largely confined to Europe and Japan. “Both Honda and Yamaha are struggling with this business and we thought of creating the best marriage this way,” he added.

Beyond working together in the 50cc scooter space, the two companies could explore the possibility of collaborating in electric motorcycles and examine areas relating to range, charging time, performance and cost.

“In the case of e-motorcycles, there are technological difficulties compared to four-wheelers. We will try and make a good alliance with Honda as each of us has some know-how in this space,” said Yanagi. “If we can put that together, there will be better technology in the process.”

Aoyama, however, said there was no clear commitment “so far” about electrification in terms of collaboration with Yamaha. To that extent, it is premature to say if an all-new electric bike will be jointly developed by Honda and Yamaha. “We don't know the future style yet but we do want to collaborate. In the motorcycle industry, while competition is very important, harmonisation is as critical,” said Yanagi.

Bringing these two elements together for the perfect mix would be the best bet forward for a successful partnership. The Yamaha chief made it clear that the collaboration with Honda should not be misinterpreted as the beginning of a stronger association in other areas. “I don’t know yet what could happen but we will have to wait and see if there is some outcome with this harmonisation,” he said.

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