Perspectives from ISB

In continuation with last week’s report on tie-ups among car majors, now a new alliance seems to be forming among Toyota Motor Corp. and Suzuki Motor Corp. The two family run car manufacturers are in talks to share the burden of developing self-driving cars and low-cost vehicles. The alliance would provide Toyota a much needed foothold in emerging markets such as India. Meanwhile, Suzuki, operating mainly in the low margin category, would benefit through sharing the cost of developing new technologies. Suzuki sells more than two million cars a year, while Toyota sells more than 10 million.

As reported earlier, car makers are facing ‘unprecedented’ changes in their business landscape. Starting from tighter emissions regulations that threaten the dominance of gasoline engines, to challenges from Silicon Valley upstarts, car companies around the world are finding it imperative to collaborate in order to survive.

 However, if not managed properly, such collaborations can easily come under the ambit of antitrust laws. Hence the companies have declared that they would continue to be competitors while sharing research costs. Apart from collaborations with BMW, Toyata also has a tie-up with Mazda Motor Corp. Some analysts argue that these tie-ups are a result of the competition from the Renault-Nissan Alliance. Nissan Motor Co. is in talks to acquire a controlling stake in Mitsubishi Motors Corp., a deal that would catapult the alliance into the upper echelons of the world’s largest car makers.

Source: The Wall Street Journal, October 12, 2016