Toyota's potential partnership with Suzuki highlights problems in China

Toyota and and Suzuki are talking about an alliance, and the initial response, according to Bloomberg’s Craig Trudell, Yuki Hagiwara, and Jie Ma, is dubious.

“In exploring collaboration between Toyota and Suzuki Motor Corp., chieftains Akio Toyoda and Osamu Suzuki seek to tie together companies with a history of failed alliances,” they wrote.

A Toyota-Suzuki marriage would be quite the family business, obviously. Bloomberg focuses on the R&D benefits that Suzuki would reap, but there’s a chance that Toyota wants a tie-up because of it’s struggles in China — and Suzuki’s strength in India.

“What Suzuki brings to the table is a leading position in India,” Bloomberg noted. “Its Maruti Suzuki India Ltd. unit has long dominated the market with inexpensive cars like the Alto and Swift. Though Toyota has introduced budget models such as the Etios compact, its market share remains well behind the 47 per cent reached by Maruti Suzuki last fiscal year.”

India is Suzuki’s bright spot. The automaker left the US car market in 2012, as its lineup of vehicles had captured negligible market share. But it’s expertise in small cars has yielded tremendous success in India, a growth market that if often overshadowed by China.

Toyota’s position in China, already the world’s largest market, is weak compared with automakers such as Volkswagen and General Motors, which combined hold about 30% share in the Middle Kingdom, thought joint-ventures with Chinese carmakers. Toyota only has around 5%.

That’s a gigantic amount of ground to make up, so Toyota could be looking at Suzuki as a key way to get in on that nearly 50% share in India — especially given that Toyota holds only about 5% of that market, as well.

The problem with very weak market share is that it’s difficult to turn the situation around. Volkswagen has this problem in the US, where it’s share is meager relative to its global rivals. Ford got a late start in China and has been gaining, but it’s going to take a while before it’s truly competitive with GM and VW.

Suzuki smaller, cheaper strategy has been a perfect fit for India. Now Toyota may see that market as a better place to invest resources than continuing to struggle in China.

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