From Toyota-Suzuki to PSA and FCA, it’s all about consolidation

Barely three weeks into March and the automotive industry is already abuzz with news on companies getting into further consolidation mode.

Wednesday saw Toyota and Suzuki announce the next phase of their partnership which, cliched as it may sounds, is truly in top gear. Apart from Baleno and Brezza, Suzuki will now supply its Ertiga and Ciaz models to Toyota which, in turn, will re-engineer and retail them under its own badge.

The two automakers will also join hands to develop a Toyota C-segment multi-purpose vehicle meant for Suzuki. Additionally, the partners will extend their work to parts of Europe and Africa while Toyota’s strengths in electrification will be tapped to help Suzuki in India.

Beyond the Japanese space there is a lot of action happening in Europe, where speculation is rife that Groupe PSA and Fiat Chrysler Automobiles (FCA) could join hands in what promises to be an exciting alliance. Neither company has officially confirmed the news though both are apparently open to the idea of new partnerships.

Reports have also been doing the rounds that PSA could even partner General Motors from who it acquired Opel and Vauxhall two years ago and turned around both brands quite successfully. Either of these options will catapult the French carmaker to a stronger presence in North America where it proposes to have the Peugeot brand lead the fray.

FCA’s biggest strength derives from the Jeep brand which accounts for over a third of its overall sales. Yet, it is no secret that the company is keen on greater consolidation to be able to meet the challenges of a new decade which promises to be disruptive. FCA’s late CEO, Sergio Marchionne, had reached out to GM for an alliance/merger but nothing came out of it. Whether the new boss, Mike Manley, and his counterpart at PSA, Carlos Tavares will strike a new deal is the million-dollar question. It was also not too long ago when FCA was on the radar of Chinese automakers, Geely and Great Wall Motors.

Manufacturers are gearing up for an era of autonomous driving, electric mobility, connected cars and what have you. All this will mean enormous investments and the best way to handle this challenge is to cooperate and focus on cost savings. Carmakers know this only too well and this puts in perspective why every stakeholder is on the lookout for new alliances.

Who would have thought some years ago that a Toyota and Suzuki would actually come together? The latter has had its share of partnerships in the form of GM and Volkswagen but in today’s new era, it perhaps makes more sense to join hands with a a fellow Japanese ally. This explains other recent alliances like Toyota-Mazda (for North America), Nissan-Mitsubishi and even erstwhile foes, Honda and Yamaha for a specific segment of scooters.

Toyota’s Akio Toyoda and Osamu Suzuki are obviously keen on strengthening the partnership, at least going by the spate of announcements since the time they made known their intentions over two years ago. This by itself is unusual and does not quite go in line with the otherwise circumspect/understated stance of Japanese automakers.

The fact that updates are constantly coming in reflects a certain keenness to let the world know that both Toyota and Suzuki are dead serious about the road ahead. Whether this eventually takes the form of equity is not so relevant now given that the bonding is there for all to see.

Other marriages elsewhere

Beyond Japan Inc, there are other marriages happening elsewhere across the world. Volkswagen will work with Ford on pick-ups and potentially other initiatives in the mobility space. VW has also joined hands with Hino Motors (a Toyota group company) to explore opportunities in commercial vehicles though this could largely be focused on the ASEAN region.

Ford, meanwhile, has tied up with Mahindra & Mahindra for electric mobility and SUVs. The two were partners over two decades earlier, soon after India threw open its gates to multinational carmakers, and parted some years later. Both have gone through their own experiences since then and have thought it appropriate to come together once more in a new world of mobility disruptions.

Likewise, the Tata Motors-owned Jaguar Land Rover is in all sorts of trouble right now and it remains to be seen what kind of restructuring is on the anvil. In fact, PSA has been spoken of as the possible knight in shining armour but there is no official word on this yet.

The list of alliances is only growing by the minute as carmakers grapple for answers to a new and challenging arena where it makes sense to step into the big unknown with a partner rather than fight it out alone.

Going forward, there will be greater consolidation happening with big brands like BMW and Daimler or perhaps a deeper partnership between Honda and Yamaha. The possibilities are endless, especially with stronger Chinese automakers like Geely constantly on the lookout for acquisitions.

The world is also going through turbulent times with countries now redefining the rules of trade. China and the US have been blowing hot and cold in recent times and there is no telling where this will lead to. The leaders of both countries are unpredictable and tariff barriers may just end up messing things up for automakers.

Brexit is another area of concern that has led to the likes of Honda slamming the brakes on production in the UK. Additionally, some top ancillary suppliers such as Schaeffler have already announced that they will be shutting some plants in the country. Should things get out of shape in Britain, there will be further haemorrhaging in the auto market as jobs go out of the window and investments come to a standstill.

These are tough times for the industry which only reinforces the need for more partnerships/alliances. Leadership will play a pivotal role here that will eventually separate the men from the boys.

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