Masakazu Yoshimura is clearly in a vantage position when it comes to all the action happening between Toyota and Suzuki. He took over as Managing Director of Toyota Kirloskar Motor (TKM) earlier this year and during that time, the bonding between his parent company and Suzuki has only strengthened. The latest news is the equity crossholding which pretty much signals the levels of commitment for the future.
India is, of course, a key component of the alliance but there is a lot of action due to happen in Europe, the Middle East and Africa too. “Our collaboration will intensify in the coming years and there is a lot of learning to do from each other,” reiterates Yoshimura.
Intense customer focus
Both Japanese auto brands have a commonality when it comes to intense customer focus with the only difference being smaller cars in the case of Suzuki and larger ones for Toyota. As Yoshimura says, there are “good synergies” which will only intensify as the relationship deepens. Yet, the two companies will remain fierce competitors on the front end even while making the most of pooling skills for production, sourcing etc.
The key to making things work perfectly is human capital and the ability of teams from both automakers to get along with each other. “Development of human resources is difficult and time consuming in business but both of us have a good philosophy of training people,” says Yoshimura.
From Toyota’s side, this is familiar territory given its history of collaborations with other Japanese brands such as Subaru, Daihatsu and Mazda. “Part by part, region by region, country by country, segment by segment, we are having good synergies with some of these Japanese brands,” he adds.
This is but natural given that the automobile industry is on the cusp of its biggest change since a century now with a host of new challenges that could disrupt the once predictable mobility landscape. Customer tastes are changing and companies will have their work cut out in new areas like electrification, autonomous driving and so on.
Yet, amidst all this, the priority is to “keep the brand values intact” and this where Toyota will look at a host of new areas with Suzuki. According to Yoshimura, it is important to keep the human touch intact during this transition. As he puts it, loving Toyota is good but should not mean that “I hate someone else”.
“That kind of a mentality must go since all of us are in the same industry to serve consumers,” says the TKM chief. In his view, balancing competition with (the realities of) a partnership is not the easiest of tasks and a win-win principle becomes important. This is where the human resources team will have its work cut out. Swapping machines, ideas and people can also happen so long as this eventually benefits the extended ecosystem of suppliers and dealers too.
Both Toyota and Suzuki have their individual strengths to offer in this partnership especially for India where the latter has more than an edge in volumes and economies of scale. In the case of Toyota, it has in its armour competencies like electrification and, by the end of the day, both companies can gain immensely from each other’s strengths.
“I repeatedly ask my team what Toyota is all about as a brand and why do people like us,” continues Yoshimura. The fact remains that it is still a very small player in India, in terms of market share, even while it has successful brands like the Innova Crysta.
In his view, Toyota’s marketing and sales activity starts from the after-sales function. And even while marketing is essentially about getting a product sold and thanking the buyer, Toyota believes this is where the actual business begins in terms of building a relationship with customers after sales.
“This is much more important since that kind of support is critical for brand loyalty. What can we offer which is different from, say, what Maruti is offering? In my brand philosophy, that is particularly critical,” says Yoshimura.
He is quick to point out that a company like Maruti also focusses on this aspect too with its customers but perhaps this is more “in the manner of” volumes, cost reduction, mini cars and Indian design tastes where “I think we are perhaps not that good”.
According to Yoshimura, Toyota’s cars are designed more for the US and Europe even while the company now has more than a fair idea of the “taste of India”. “Maruti is far more dominant here and their design philosophy is more in tune with India and for India and this is where we have a disadvantage in comparison,” he says.
Yet, Toyota’s philosophy is all about relationship building with customers. “We have always maintained that we are a customer-focused brand which people here in India also understand,” he adds. How has all this helped with the Glanza, the first product swap between the partners, which Maruti retails as the Baleno?
N Raja, Deputy Managing Director, reiterates that TKM is not into numbers and the top priority was to see how it could draw “happy customers” for the Glanza. The key was to get new buyers to experience the Toyota world.
“We have been quite successful given that nearly 50 per cent of Glanza customers are new ones into our ecosystem. Our aim is to show them how Toyota is different and make them customers for life,” he says.
To that extent, Glanza has been successful which is quite commendable considering that alliance partners in the past have not quite hit the sweet spot with cloned products. There are recent instances of the Micra-Pulse and Sunny-Scala (for Renault-Nissan) which did not quite work according to plan.
“Our learning told us that we needed to focus on the millennials and the marketing strategy revolved around this. Hitherto, they have not been part of our family because of the price range and we have good learnings with Glanza in terms of reaching out to them differently,” elaborates Raja.
The age group is less than 30-35 which is good for TKM since this youthful pool has not been a dominant part of its product range. “For Glanza, you could see youngsters queuing up and the feedback suggests faith in the Toyota badge, which is a premium brand, coupled with greater expectations on far better post-sales experience,” he says.
Yoshimura credits the TKM team for pulling it off with Glanza which he attributes to hard work and the ability to differentiate the product and identify new customers. “This success has boosted their confidence,” he says.
The next product swap will be the Vitara Brezza that, beyond its rechristening, will also need to go through the same exercise of detailed research. As Raja says, it is but obvious that the same modus operandi for Glanza cannot be replicated. “We need to check what is different, understand the customer more and see what they would like,” he adds.
There is clearly a lot more on the plate for the Toyota-Suzuki alliance though Yoshimura admits that there is a good plan ahead even while there are “things I cannot disclose now”. Electrification will clearly get a lot of attention as also new products and markets.
For instance, the ASEAN region is strong for both brands, especially markets like Thailand and Indonesia, but the fact also remains that population growth here could be peaking in the next 5-10 years. India, on the contrary, has a “good population pyramid” combined with a youthful buyer base of less than 30 years old.
“This is good for us as also regions like Africa and the Middle East where we need to have a sound strategy for the mid and long-term. We need to cater to customers in that area and this is where India is nicely positioned with its geographical location, skills in technology and people to help out in exports,” says Yoshimura.
Other brands such as Daihatsu can help out for South America even while both Toyota and Suzuki have their strengths in a host of other countries. “It is always better to leverage one’s strengths and this is how we will move the brands within the Toyota family,” he adds.
Globally, markets are in a state of turmoil and uncertainty thanks to issues like Brexit and trade wars. Within auto industry circles, the unanimous view is that the bubble will burst sometime. As Yoshimura says, it is important for companies to be very careful and not commit long-term investments. The silver lining in the cloud is that this will “give us the discipline and training to allocate our resources better”.
More importantly, he reiterates, “we must also have sensitive, good antenna to receive and feel what is happening to be able to plan our moves”. Things are no different in India either where there have been major disruptions in the form of demonetisation and GST.
Right now, tackling the slowdown and preparing for the new BS-VI emission norms is the biggest challenge for automakers. For Yoshimura and his team at TKM, these are interesting times especially when it comes to new initiatives with Suzuki.