But can they end up eating market shares of each other?
“There are two ways to success. One, you do all the hard work, launch right products at the right time. Two, you copy the leader and do exactly what he does”, said the head of one of the top four two-wheeler makers in the country who is himself keenly fighting market share battles for years.
This statement seems apt with the announcements made on Thursday by two Japanese heavyweights – Suzuki and Toyota - quite literally. As a result, two best-selling products of Maruti Suzuki will be copied by Toyota for selling them back in the same market after rebranding them.
While detailed contours of the tie-up have not been shared as yet including if Toyota is allowed to use the platforms for spinning off its own products, this has, nevertheless, helped the world’s largest car maker leapfrog years of product development process and jump directly to launches. Suzuki gets to tap into the vast pool of Toyota's electric and hybrid vehicle tech, which it badly needs to meet future challenges.
Despite entering India two decades ago, Toyota is nowhere close in replicating its global success. It has poured over Rs 13,000 crore over the years towards new products, new facilities, new development centre and market research.
However, an over-cautious approach that led to inordinate delays in product development, new product launch failures and inability to gauge future buyer trends has marred Toyota’s performance in India. For instance, it took Toyota engineers six years just to study what is the best-suited product for the Indian market when it set out to build a made-in-India-for-India product.
The result was a mid-size sedan, positioned between the compact sedan (like Maruti Dzire) and premium mid-size sedan (like Honda City). However, by the time Toyota launched the Etios, demand for such cars fizzled out and today the segment is nearly non-existent. The hatchback version called Liva (prime rival Maruti Swift) met with similar fate.
The failure of two promising products and the Supreme Court-directed ban on big SUVs resulted in an even reduced interest from Toyota, Japan to revive the Indian operations, pushing the company further back into its shell. But the Japanese giant, now sees the tie-up with small car king Suzuki Motor Corporation as the route to bail itself out in India.
In exchange for EVs, hybrid technology and the low volume, executive sedan Toyota Corolla now stands a chance to crack the alluding sub-4 meter car and SUV market which is where 75 percent of the domestic market resides.
Both Brezza and Baleno from Suzuki are chartbusters with current volumes of 3-3.5 lakh per year and growing. Toyota hopes to have a slice of this pie for itself. The contract manufacturing arrangement between the two companies will lead to an expanded portfolio (three new models) in the market.
But can they end up eating market shares of each other? Maybe yes. Given the fact that Toyota would be restricted in given a premium pricing to the two models. Unless there is a significant rework done by it, which is unlikely as Toyota intends to launch these cars next year itself, it will force Toyota to price the cars at almost the same level as that by Maruti.
Maruti has had a similar arrangement with Nissan a few years ago when it built and supplied the mini car A-Star under the brand Pixo targeted purely for the European markets. But that market was not so hotly contested by it as Suzuki was a much smaller brand in Europe than say Volkswagen. That deal lasted for five years. Now Maruti is allowing Toyota to have a piece of its own cake which it has carefully baked, but will the deal pay off?
