Suzuki and Toyota have decided to pool money to beat competition in global auto industry

  • Two of the world's largest car makers have come together to form a capital tie-up, according to Japanese public broadcaster NHK.
  • Suzuki is one of the world's leading small car maker while Toyota is known for its bigger variants.
  • Suzuki operates in India through its subsidiary Maruti while Toyota has seen success with its SUVs like Innova in India.
Japanese car makers Toyota and Suzuki have decided to pool in capital expanding their existing partnerships in electric vehicles, according to the country's public broadcaster NHK.

This marks the biggest consolidation in recent times in the global automobile industry, which has been going through a rough face recently due to slowing economies around the world, falling demand for cars, and technological leaps that threaten the very existence of traditional car makers.

Suzuki, which specialises in affordable compact cars, had been struggling to keep pace with the huge costs of investing in research including self-driving cars..

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The two companies announced a tie-up to produce electric vehicles and compact cars for each other to better compete with fast-changing technologies in the global auto industry. The rise of cab hailing services like Uber and Ola have also eaten into the mobility pie. The unravelling trade war between US and China has dented sales and political events like Brexit (Britain's exit from the European Union) have cast an ominous shadow on businesses. Emission norms are getting stricter across the world and that is adding the burden of investment on car makers at a time when there are fewer buyer in the market.

Earlier this month, Toyota cut its full-year forecasts citing unfavorable currency exchange rates while the sales grew a mere 4%. Suzuki too has cut global production for the fifth month in a row in June 2019, including in its biggest market India, where car sales have now declined for 10 straight months.

The partnership will be a threat to car makers in India, like Tata Motors, M&M, Hyundai, who are also in a state of flux like much of the world for similar reasons- slowing growth and demand, falling sales, and the need to invest in new technologies. Suzuki has deeper roots in India thanks to its partnership with Maruti Suzuki, the country's largest car maker with an enviable distribution network.

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Toyota too has seen some success in India since it entered the mass-market segments in India in the second half of the 2000s. The sports utility vehicle Innova has been a runaway success and nearly synonymous with the category. Other models have made a mark in India although not as big as the Innova.

The two companies together have a history of over 200 years and the partnership reflects both the current state and the future possibilities. Few in the world may have werewithall to battle the combined muscle-- financial, expertise, and brand value-- of Suzuki and Toyota in the journey to electric vehicles and subsequently to newer technologies like automated driving etc.

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