Toyota (TYO:7203) and Suzuki Considering a Business Alliance

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Toyota Motor Corp (TYO:7203) and Suzuki, two large automobile manufacturers from Japan, are thinking of coming together to form a business partnership. They revealed on Wednesday that the companies were in talks about a wide-ranging business partnership.

No further details regarding on the nature of the partnership, or what will happen to the existing companies, were divulged, though.

The Chief Executive and President of Toyota, Akio Toyoda said, “Everything, including the possibility of a capital tie-up, will be discussed going forward”. Suzuki’s chairman, Osamu Suzuki, was also present at the news conference.

It is unusual that the top leaders of both these companies were present to talk about the partnership, at such an early stage. It shows that they are both committed to make this happen.

Both Businesses to Benefit From the Alliance

Analysts are saying that both the businesses are likely to gain from this partnership.

Even a partial merger will help Suzuki (TYO:7269) gain from the presence of Toyota, which competes with Volkswagen for the spot of the world’s biggest automaker. Suzuki can also benefit from the resources and scale of Toyota, which can then be used for developing new technologies, such as battery-powered electric cars and self-driving automobiles, which are future areas of growth for the industry.

Tesla Motors have already taken a head start here.

The partnership is going to help Toyota too, particularly in countries such as India, where Suzuki is currently number one through their local business Maruti Suzuki. Toyota has a market presence in India, but it is much smaller than their Japanese rival.

India is a huge market where Toyota will want to improve their presence. Suzuki is perfect for the market because the company makes affordable and small cars that are a good fit for the Indian roads and pockets, as most buyers are price sensitive. Toyota will also be able to gain from Suzuki’s impressive sales and services network in the country.

Collaborations on Research and Development

It was learned that the two automobile manufacturers are trying to find out common areas where they can work together in research and development. The automobile industry as a whole has to deal with increasing costs to make cars cleaner and safer. Plus, there are emerging technologies too that are being integrated into automobiles.

Suzuki, smaller in size than Toyota (TYO:7203), went into a partnership with Volkswagen AG a while back. But that initiative failed.