Growing Giant

Nikkei Shimbun delivered a scooping story on Wednesday, which indicated that two major Japanese motor companies, Toyota and Suzuki, were considering business partnership on producing light automobiles for emerging countries. Toyota needed Suzuki to explore its business in India or other Asian countries that had broad demand for compact and less expansive cars. Even the world top carmaker proves to be serious for surviving competition over automobile sales.

Toyota secured its status of top carmaker in the world for four consecutive years, with 8.9 millions of cars produced in 2015. Establishing partnership with Suzuki that has 3.3 millions last year, Toyota can leave Volkswagen in the second place and General Motors in the third place further behind. Suzuki has 36% of car sales in India, which Toyota deadly wants. While Toyota had been expecting increase of share in emerging countries with the partnership of Daihatsu, Daihatsu did not make good achievement in developing new small cars. Toyota is considering possessing whole amount of stocks of Daihatsu.

Not only expanding share in emerging countries, Toyota is considering broad cooperation with Suzuki, including in ecological cars or automatic cruise. If the negotiation proceeds preferably, it will be offering joint business in development or sales, with possibility of holding stocks for certain amount.

After dissolution of a business partnership with General Motors in 2008 and Volkswagen last year, Suzuki had been looking for a new partner. To enhance its ability for technological development in less emission or automatic cruise control, which requires great amount of cost, Suzuki seems to be choosing domestic partnership with Toyota. A fact that the founders of Toyota and Suzuki were from same region in central Japan can make the business partnership easier.

Suzuki and Daihatsu have 60% of share in making light automobile with capacity of 660cc or less. As cooperative companies under partnership with Toyota, it is possible for them to face the requirement of anti-trust law. There is an argument in related Ministries that the business partnership should not lead to price hike of light automobiles as a matter of cartel.

After the report of Nikkei, both Toyota and Suzuki denied any negotiation for the partnership. While leading car makers in the technology of hybrid car, fuel cell vehicle or automatic cruising, Toyota have to seek further growth as a car giant. But, it is still unclear whether scale merit will work for that.