Toyota Motor and Suzuki Motor are strengthening their alliance by taking stakes in one another, the latest alliance in an industry facing sweeping changes in technology, consumer preferences and business models. Japan’s biggest car maker will acquire about 5 per cent of Suzuki shares for about ¥96 billion (Dh3.33bn), while Suzuki will get a smaller holding valued at about ¥48bn in Toyota, the firms said on Wednesday. The move builds on ties established two years ago between the two car makers and is aimed at expanding their collaboration to keep up with electric and self-driving cars, as well as growing demand for on-demand rides and new businesses that are reinventing how people get from point A to B. For Toyota, the deals adds yet another automaker to the company’s expanding portfolio of parnerships, which include Mazda Motor and Subaru. “As the late Sergio Marchionne often reminded his peers, there are too many automakers doing very similar things,” said Ali Izadi-Najafabadi of Bloomberg New Energy Finance’s Intelligent Mobility group, referring to the Fiat Chrysler Automobiles chief executive who died last year. “Suzuki and Toyota have unique attributes complementing each other.” Toyota will pay ¥4,004 a share, lower than Suzuki’s closing price of ¥4,085 on Wednesday. Suzuki shares are down 27 per cent this year, following a 15 per cent decline in 2018 as the Indian economy cooled. “Toyota is getting Suzuki at an attractive valuation,” said Janet Lewis, an analyst at Macquarie Capital Securities (Japan). “It appears to be very similar to the mutual investments made between Toyota and Mazda.” Suzuki said it will use ¥20bn of the proceeds on development of new technologies including autonomous driving, and the remainder to replenish its capital. The company is seeking to team up with a larger car maker after an acrimonious split with Volkswagen. Toyota has budgeted about seven times more on research and development than Suzuki for this fiscal year, and the smaller firm has pointed to the soaring cost of making competitive cars as a reason to join forces with a partner. “On autonomy, it makes more sense for Suzuki to rely on Toyota because it requires a lot of time and money,” Mr Izadi-Najafabadi said. Alliances are becoming ever more critical in the global car industry, as manufacturers seek to pool resources and save costs. Ford has teamed up with Volkswagen, while Honda and General Motors are working together. There’s also the three-way alliance of Renault, Nissan and Mitsubishi Motors, which has been on shaky ground since the arrest of former chairman Carlos Ghosn in November. The deal gives Toyota greater access to Suzuki’s presence in India, which is on track to overtake Japan and become the world’s third-largest vehicle market. While Suzuki is small in other markets, it occupies almost half of the market share in India. Sales at Suzuki’s Indian subsidiary fell 34 per cent in July, the worst decline in almost seven years, as a slowdown in consumer spending, the largest driver of growth in the $2.7 trillion (Dh9.91tn) economy, became more pervasive. In February 2017, Toyota and Suzuki agreed to begin “concrete examination” of a partnership in technology and procurement. A year later, they agreed to sell each other’s hybrid cars and other vehicles in India. This March, Toyota further expanded the alliance to supply its hybrid system to Suzuki globally, while Suzuki will sell compact vehicles through Toyota in India and Africa. The car makers also said they plan to produce joint battery electric cars in India around 2020.
