Suzuki, not Daihatsu, to drive Toyota in India

Toyota Motor Corporation will rather go along with Suzuki than its wholly-owned arm, Daihatsu, for the next phase of its India growth story.

According to Hiroyuki Fukui, Toyota’s Chief Executive Officer of Asia, Middle East & North Africa, Daihatsu will be a better bet for the Asia-Pacific region, where it is already present in Indonesia and Malaysia, as well as in Japan.

Suzuki, on the other hand, “is a master in India” where its local arm, Maruti, has a near 50 per cent market share. In comparison Toyota, added Fukui, “is a student” and it would have a lot to learn from Suzuki. This is in sharp contrast to its overwhelming presence in other markets.

The two Japanese automakers had kicked off talks last October to explore an alliance in R&D and advanced/future technologies. Once a decision is made to take the partnership forward, there could be a much clearer plan on India and how the duo can work together.

Daihatsu was tipped to partner Toyota, too, in the sub-continent thanks to its expertise in small cars. However, the decision to focus on the ASEAN region possibly stems from the fact that it is a lot easier to work out a viable business plan thanks to free trade agreements which translate into zero tariffs for imported shipments.

Extending the Daihatsu alliance to India will not make much sense in this backdrop and Toyota will rather leverage the remarkable costing competencies of Suzuki as and when the alliance fructifies at a global level. As Fukui said Maruti is the clear leader in India where it is already clocking close to two million units annually. Toyota’s market share, in contrast, is in the single-digit range with the Innova Crysta as its top-selling model.

It was barely some weeks ago, when Toyota joined hands with Mazda for an electric vehicle programme in North America. The next big thing could be with Suzuki though there is no clear indication when the alliance will be formally sealed.

Interestingly, the announcements with Daihatsu and Suzuki came in rapid succession last October. First, Toyota made known that it was setting up an internal company with Daihatsu, which would focus on compact vehicles for emerging markets. Then came the news on exploring a technical collaboration with Suzuki, at a press meet in Tokyo chaired by Akio Toyoda, President & CEO of Toyota, and Osamu Suzuki, Chairman of Suzuki. “At the joint news conference held with Daihatsu, I said that Toyota is not really good at creating alliances. Traditionally, Toyota had been fixated on the need to be able to cover all of our own bases. However, as the surrounding environment is changing drastically, we need to have capability to respond to changes in order to survive,” Toyoda had said.

Daihatsu, he added, would take on a central role in Toyota’s compact car business for emerging markets. The joint internal entity will be responsible from product planning to production preparation. This will be based on Daihatsu’s approach to manufacturing affordable, high-quality products for emerging markets, in which the “potential for growth is high but in which competition is intensifying”. Daihatsu will basically be responsible for unified development, procurement and production preparation for compact vehicles for emerging markets based on ‘DNGA’, a Daihatsu vehicle architecture now being defined. Toyota will support these efforts by providing knowledge and resources.

Both companies will jointly formulate and share product and business plans. In addition, they will put their existing production bases to mutually effective use. Daihatsu is expected to take the lead in the internal company and the two will implement a strategy of ‘selection and concentration’.

(The writer is in Tokyo at the invitation of Toyota Motor Corporation)