Apart from just developing technologies, carmakers are now trying to leverage suitable platforms, assembly lines and merge component sourcing divisions, to cut costs and improve profitability amid stagnant demand.
The concept an automobile itself has changed because of rapid evolution in technology—whether it be electric, automated, connected or shared. This means manufacturers have to offer consumers a wide range of choices in mobility, said Naveen Soni, senior vice-president, Toyota Kirloskar Motors.
“Additionally, tightening of regulatory norms like Cafe (corporate average fuel efficiency) and faster up-gradation of emission norms requires huge investment from manufacturers in short lead-time," he added. Collaboration and alliances help synergize and optimize costs (economies of scale) and resources for better output."
“These strategic alliances will help automakers gain access to new technology and new markets, domestic, as well as, international," added Soni.
The changes have already fuelled collaborations and are set to usher in many more such tie-ups in coming months, industry officials said.
In December, Italian-American manufacturer, Fiat Chrysler Automobile NV, announced its merger with French manufacturer Groupe PSA, to create the third-largest original equipment manufacturer (OEM) in the world. Earlier during the year, Fiat Chrysler was in talks with another French major, Groupe Renault, for a possible merger.
Manufacturers in India are not insulated either from the emerging trend, as it offers greater financial flexibility and ability to invest in technology.
After Japan’s Toyota Motor Corp. and Suzuki Motor Corp. decided to come together to develop affordable electric vehicles for India three years ago, they deepened their ties last August by buying small stakes in each other.
Apart from manufacturing electric and hybrid models, both companies now plan to jointly develop autonomous driving technology. In India, Suzuki will also use Toyota’s factory in Karnataka to manufacture some of its products.
Suzuki needs access to electric and hybrid technology from Toyota, if it has to protect its 50% market share in India in the coming decades, at a time when several Chinese manufacturers—many of whom made their debut at the Delhi Auto Expo—are eyeing a slice of the market.
Following the Japanese, American manufacturer Ford Motor Co. and Mahindra and Mahindra Ltd decided to form a joint venture, with the latter owning 51% of the combined entity. The companies are jointly developing electric and normal internal combustion vehicles, and sharing some of the existing platforms on both sides.
In the coming years, both entities might also streamline their sourcing operations to reduce cost, according to industry officials. As part of the deal, Ford Motor transferred its two manufacturing units under the joint venture leaving aside the engine plants.
After struggling to consolidate itself in the Indian market even after two and a half decades, Ford’s decision to form a joint venture with M&M, was part of its $11 billion restructuring plan, wherein the company will focus on key markets like the US and China. Under the new arrangement, most assets of the American company in India will be managed by M&M.
M&M managing director Pawan Goenka said in an interview that collaborations will be the name of the game for the promising segment of electric vehicles.
“To make electric vehicles viable will require collaboration and without collaboration, it cannot happen. The kind of investments the big OEMs are talking about we have seen some staggering numbers," Goenka said. “If we have to invest $10 billion in electric vehicles, that obviously we cannot."
Tata Motors managing director and chief executive officer Guenter Butschek said his company was also looking for collaborations.
In 2017, Tata Motors had signed a memorandum of understanding (MoU) with Germany’s Volkswagen AG on the sidelines of the Geneva Motor Show with the intent of sharing product architecture and power-train solutions. However, the two companies called off the alliance later.
“It did not work out, unfortunately. However, we are open to other collaborations. We have consistently been in talks (with several players), but none of the talks have gone to a concrete level that we could sign another MoU."
Last August, Tata Motors chairman Natarajan Chandrasekaran said at the annual general meeting that he was open to collaborations, whether on technology, products or others. “You never know where you might end up when you seek collaboration. It can be a licensed agreement in order to leverage existing technologies on a broader base."
According to Avik Chattopadhyay, founder, Expereal, a brand consultancy, increasing collaboration and co-creation of mobility solutions between automakers in India is the sign of growing maturity in the market. In the global market, carmakers like BMW and Mercedes have worked together on certain projects while competing with each other.
“In the coming years, they need to up their game and co-create with domain experts. In that process, development cycles of vehicles get compressed. The way technology is changing, one company will not be able to do everything on its own and non-mobility players like startups will also become a part of the industry," added Chattopadhyay.
In the two-wheeler space, Pune-based Bajaj Auto—India’s second-largest motorcycle manufacturer—joined hands with Triumph Motorcycles to develop and manufacture middle-weight motorcycles, in the range of 200cc to 700cc. The partnership will allow Triumph to offer products in a segment, wherein the company never had an offering, while, for Bajaj, the British manufacturer’s technology and design prowess will help the company develop a product to compete with Royal Enfield.
American motorcycle manufacturer Harley Davidson, too, was looking for partners in India and China for developing middle-weight motorcycles, which might help the company expand its market share in emerging economies. On 20 June, Mint had reported that Harley Davidson was in talks with Hero MotoCorp Ltd—India’s largest motorcycle manufacturer—for a possible collaboration.
Amit Panday contributed to this story.