Will Toyota and Maruti's partnership impact auto sector's performance?

India's largest carmaker Maruti Suzuki recorded a sales decline of 3.6 per cent in February 2020, selling 134,150 units in the domestic market. It sold 139,100 units in the same period last year.

India's largest carmaker Maruti Suzuki recorded a sales decline of 3.6 per cent in February 2020, selling 134,150 units in the domestic market. It sold 139,100 units in the same period last year.

However, the company also dispatched 2,699 units of the Baleno, dubbed Glanza, to Toyota. Its exports went up by 7.1 per cent at 10,261 units, as compared to 9,582 units exported a year ago. Both exports and models sold to Toyota helped Maruti Suzuki to regain lost ground to an extent. The overall sales dipped by a marginal 1.1 per cent at 147,110 units, as compared to 148,682 units sold in February last year.

Before I elaborate on the nuances of the partnership, let us take a look at each of the companies individually.

Maruti, which was formed in 1982 as a JV between the Indian government and Suzuki Motor, is the market leader in India, with a share of 53 per cent in January 2020. It has sold over 20 million cars in India since 1982 and is a household name. Maruti Suzuki has about 3,600 dealership outlets and has also ventured into the following car-related sectors in India.

1. NEXA

In 2015, Maruti Suzuki launched NEXA, a new dealership format for its premium cars to build in a more personal experience for high-end buyers.

2. Maruti Insurance

Launched in 2002, Maruti Suzuki provides vehicle insurance to its customers with the help of the National Insurance Company, Bajaj Allianz, New India Assurance and Royal Sundaram.

3. Maruti Finance

Maruti Suzuki launched Maruti Finance in January 2002. The company tied up with ABN Amro Bank, HDFC Bank, ICICI Limited, Kotak Mahindra, Standard Chartered Bank, SBI and Sundaram to start this venture.

4. Maruti True Value

It is a marketplace for used Maruti Suzuki vehicles. One can buy, sell or exchange used Maruti or non-Maruti vehicles with the help of this service in India.

5. N2N Fleet Management

Short form of End to End Fleet Management, it provides lease and fleet management to corporates.

6. Maruti Genuine Accessories

It offers accessories like alloy wheels, body cover, carpets, door visors, fog lamps, stereo systems, seat covers and other car care products. These products are sold through dealer outlets and authorised service stations throughout India.

7. Maruti Driving School

As part of its corporate social responsibility, Maruti Suzuki launched the Maruti Driving School, which provides training under international standards.

On the other hand, Toyota Motor Corporation is based out of Toyota, Aichi, Japan and was founded in 1936. It has 364,445 employees and is the 10-largest company in the world in revenue terms. Toyota is the second-largest automobile manufacturer in the world. It produces vehicles under five brands, including the Toyota brand, Hino, Ranz and Daihatsu. It also holds stakes in Isuzu, Mazda and now Suzuki.

Toyota is the global market leader in sales of hybrid electric vehicles and one of the largest companies to encourage the mass-market adoption of hybrid vehicles across the globe. It is also a market leader in hydrogen fuel cell vehicles.

Toyota started operations in India in mid-1990s, but was able to garner a market share of only about four per cent in the domestic market. Its well-known products Innova and Fortuner are market leaders in its categories, but Toyota has failed to impress in other segments.

Toyota, which operates through a JV in India, has a profitable operation in the country, but its market share numbers are nowhere near what it has achieved in other parts of the world. Every major player in the world is present in the Indian auto market, but almost 82-85 per cent of the market share is between the four major players, Maruti, Hyundai, Mahindra and Tata Motors.

All the others have continued to be marginal players and have not really been able to crack the Indian passenger car market.

So, how does this alliance between Toyota and Maruti Suzuki benefit each other?

To start with, Toyota has already started selling Maruti's popular model Baleno as Glanza in India.

Toyota is also likely to start working as an OEM (Original Equipment Manufacturer) to Maruti in India as its production capacity is not fully utilised.

Toyota, in turn, will supply hybrid systems and electric vehicles to Maruti.

Suzuki has been pursuing a deep-pocketed partner for a while. Its earlier partnership attempts with General Motors in 2000 and Volkswagen in 2009 didn’t take shape as expected.

In the case of the Toyota-Maruti Suzuki partnerships, both the chief executives are also from the same village and this is enabling a lot of cultural fit to the partnership. With a partnership like this, I predict Maruti will remain a household name for generations to come.

(The author is circle head at Zee Entertainment Enterprises. Images sourced from author.)