Suzuki, Toyota deepen alliance, Maruti big winner4 min read . Updated: 26 Dec 2018, 03:50 PM IST
Toyota wants to learn from Maruti Suzuki the art of selling small cars. Maruti in turn wants to build a portfolio of bigger, premium cars. The companies will go for cross badging of their Corolla, Baleno and Vitara Brezza cars
Mumbai: Toyota Motor Corp. and Maruti Suzuki India Ltd’s parent Suzuki Motor Corp. are deepening their business partnership in all areas except an equity alliance as they seek to tap into each other’s expertise to take on the dynamic market for automobiles. The companies have expanded the scope of their ongoing discussions to include areas such as manufacturing and sales practices, common service centres, royalty payments on models supplied to each other and alignment of their cultures, a person with direct knowledge of the matter said.
The discussions have been taking place for the last two years since Suzuki and Toyota first announced their partnership covering areas such as green energy, safety, information technologies and mutual supply of products and components.
A potential equity alliance between Toyota and Suzuki, however, does not figure in the talks being held in Japan as both want to focus currently on learning and adopting each other’s best practices, the person said, requesting anonymity.
In India, Suzuki’s unit, Maruti Suzuki India Ltd, is the largest car maker, while Toyota Kirloskar Motor Pvt. Ltd is in the sixth spot. The deepening of the relationship between the Japanese firms is likely to help Maruti solidify its position as the dominant carmaker in India.
Toyota has taken note of the fact that Suzuki’s manufacturing processes are very simple and effective, especially in a cost-sensitive market like India, compared with its own Toyota Way, which is considered more structured but complex and time-consuming since it is based on the so-called Kaizen concept.
“Both Toyota and Suzuki have already started (the process of) how to learn from each other and how to collaborate," the person said. “There are a lot of things that Toyota needs to learn from Maruti. Maruti’s operations are very simple but very effective while Toyota’s operations are well considered but very complicated."
Kaizen is a concept pioneered by Toyota that seeks continuous improvement, even incremental in nature, in all areas of operations. It is however considered more time-consuming wherein all workers are expected to halt work when they face any problem and suggest an improvement to resolve it.
“Toyota cannot change so it needs to learn and follow Suzuki’s way of doing things. Otherwise, it cannot set new standards," the person said.
For Toyota, the partnership will be to draw those buyers who opt for a pricey Innova or Fortuner model but choose a rival brand for their second or third car, a segment dominated by companies such as Maruti Suzuki and Hyundai Motor Co. Toyota also wants to learn the art of selling small cars in India from Maruti and train its workers accordingly.
“Toyota’s sales officers do not have that kind of experience (to sell small cars). That is a difficulty in a very competitive sales market," the person said. “The sales officers do not have such kind of skill set."
Maruti, on the other hand, wants to build a portfolio of bigger, premium cars as well as source latest technologies in areas such as safety, emissions, green vehicles. The company is also seeking to benefit from the rub-off with the Toyota brand which is considered more premium than Maruti in India.
“Good collaboration and good competition. That is the concept," the person said. Maruti and Toyota will continue their rivalry for a bigger share in the Indian market, he added.
For consumers, there will be differently badged cars with different body panels from both the stable. Toyota and Suzuki will pay for the design changes that they seek from each other while sourcing the respective models in order to make the models look distinct from each other. To start off, Toyota will supply Corolla Altis to Maruti while the local unit of Suzuki will make and supply Baleno and Vitara Brezza to Toyota.
“More differentiation will happen in terms of design—Suzuki-like product and Toyota-like product. If a car is made for both Toyota and Suzuki, whoever builds the car will have the right to introduce the model first in the market. As a manufacturer, it is very difficult to launch two things at the same time," the person said. “If anybody asks for the change (in body panels), they need to pay obviously."
A spokesperson for Toyota Kirloskar said details such as the schedule of parts supply for each model, number of supplied units, vehicle specifications and pricing will be considered at a later stage.
“The vehicles will be sold by respective subsidiaries of Toyota and Suzuki based in India through their sales networks. By challenging and competing with each other with the goal of mutual improvement for each customer’s best interest, Toyota and Suzuki aim to invigorate the Indian automotive market to further enhance their respective products and services to be offered to customers," the spokesperson said in response to emailed queries.
Maruti did not respond to an emailed query.
Engineers and executives of both companies have met multiple times to learn from each other’s best practices, the person said. “In this case, it is about two Japanese companies. Their hometowns are also very close, so their culture is very similar," he said.
The person, however, said that the systems in Toyota and Suzuki differ and “some areas look difficult". “But the roots are the same, so if they both go back, then they can find a solution. They will be working like twins," he added.
Toyota city in Aichi Prefecture in Japan is less than an hour’s drive from Hamamatsu, base for Suzuki’s operations.
Significantly, there will be concerted and collaborated efforts on the regulatory front since both Toyota and Suzuki’s objectives are likely to get aligned. Both firms are inclined towards making a transition to hybrid cars, a technology that Toyota has pioneered, as against electrification, which Indian government and local companies have been advocating.