Mutual benefit
Toyota expects to report group operating profit of 2.8 trillion yen for fiscal 2015, an all-time high. In terms of profitability, it is widening its lead over Volkswagen and General Motors, which have competed with Toyota for the lead on sales volume. But the Japanese automaker is leaning more heavily on North America, a Toyota official said. Small cars, popular in India and other emerging markets, will be crucial to improving its growth prospects.
The low-cost production technology Daihatsu has cultivated through its minicar business is key to this strategy. Toyota and Daihatsu together account for about half the auto market in Indonesia, where they began joint development and manufacturing of small minivans in 2003. Toyota taking full ownership of Daihatsu would let them more easily expand their partnership into new regions and fields.
Daihatsu is expected to start sending engineers and other personnel to Toyota's emerging-market bases as early as the spring. Closer ties with Daihatsu will strengthen Toyota's small-car operations in Southeast Asia.
Toyota's trump card in India -- the world's sixth-largest market and a country where car usage is rising fast -- is the potential alliance with Suzuki. While Toyota holds a meager 4.4% share, and its Indian plants are operating at half their capacity, Suzuki has operated in the country since the 1980s and controls 40% of its small-car market. Using Suzuki's local supply chain and cooperating on development and production would hasten Toyota's expansion.
Partnering with Toyota would also be to Suzuki's advantage. Toyota's annual research and development spending comes to more than 1 trillion yen, compared with less than 200 billion yen at Suzuki. The smaller automaker will have a hard time complying with tightening environmental regulations without support, and self-driving technology, which automakers are scrambling to bring to market, is expensive to develop. Joining hands with Toyota would give Suzuki access to the larger automaker's wealth of technology and allow it to supplement its lineup with Toyota-made vehicles.