Toyota and Suzuki form capital alliance

TOYOTA Motor Corporation and Suzuki Motor Corporation have agreed to enter into an alliance based on mutual part-ownership, with the aim of helping each other keep up with the rapidly evolving automotive industry.

Subject to regulatory approval, Toyota will invest ¥96 billion ($A1.35b) to acquire a 4.94 per cent stake in Suzuki, while Suzuki will purchase ¥48b ($A670 million) of Toyota shares, equivalent to a holding of approximately 0.2 per cent.

In a joint announcement, Toyota and Suzuki said the alliance was formed “to establish and promote a long-term partnership between the two companies for promoting collaboration in new fields, including the field of autonomous driving”.

The formation of this alliance builds on the announcement in March this year that the two Japanese companies would pool their product development and production resources, with a focus on Toyota’s electrification technologies and Suzuki’s strength in compact vehicles.

According to the announcement, Toyota and Suzuki “began considering business partnership on October 12, 2016,” and that the formation of an alliance was “the outcome of sincere and careful discussions between the two companies”.

In an interview with Japanese financial journal Nikkei Asian Review, Suzuki chairman Osamu Suzuki revealed that the idea of a capital alliance with Toyota had been in his mind since the two firms opened talks in 2016.

“I asked (Toyota) president Akio Toyoda for a capital alliance in May,” he said.

The joint announcement from Toyota and Suzuki describes the “turning point unprecedented in both scope and scale” facing the automotive industry.

“Not only because of enhanced environmental regulations but also from new entries from distinct industries and diversified mobility businesses,” it says.

“The two companies intend to achieve sustainable growth by overcoming new challenges surrounding the automobile sector by building and deepening cooperative relationships in new fields while continuing to be competitors, in addition to strengthening the technologies and products in which each company specializes and their existing business foundations.”

Specific outcomes of the capital alliance are yet to be revealed, but the collaboration announced in March will spawn electrified Suzukis for European consumption based on the Toyota RAV4 and Corolla wagon, with Toyota gaining greater access to the Indian market with compact models based on the Maruti Ciaz and Ertiga platforms as well as a range of Indian-made models for export to Africa.

Toyota has existing financial relationships with Mazda and Subaru, while Suzuki partnered with General Motors for many years before its unsuccessful tie-up with Volkswagen Group was established in 2009 and ended with an acrimonious split in 2015.