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Toyota & Suzuki's cross-badging route in India - New partnerships and strengthening alliances are the name of the game


Barely three weeks into March and the automotive industry is already abuzz with news on companies getting into further consolidation mode.

Wednesday saw Toyota and Suzuki announce the next phase of their partnership which, cliched as it may sounds, is truly in top gear. Apart from Baleno and Brezza, Suzuki will now supply its Ertiga and Ciaz models to Toyota which, in turn, will re-engineer and retail them under its own badge.

Under cross-badging, companies come together to sell a vehicle under different brand names, with some small cosmetic changes. Developmental costs of new models are minimized while brand identity is also retained.

Beyond Japan Inc, there are other marriages happening elsewhere across the world. Volkswagen will work with Ford on pick-ups and potentially other initiatives in the mobility space. VW has also joined hands with Hino Motors (a Toyota group company) to explore opportunities in commercial vehicles though this could largely be focused on the ASEAN region. Ford, meanwhile, has tied up with Mahindra & Mahindra for electric mobility and SUVs. 

Also, the big question is will the alliance between the companies going to be boon or bane for Maruti? Analysts fear that, the alliance might end up in cannibalizing the sales of Maruti Suzuki’s premium products. Also, past experience hasn’t been very encouraging. Collaborations of Nissan-Renault, Volkswagen-Skoda and some others have not fared well in India. “It will lead to loss of volumes of the entire premium segment range at Maruti, thereby arresting its volume growth," according to a report by ICICI Securities Ltd. What Toyota is bringing to the table is of limited benefit to Maruti Suzuki, said the report.

Unlike in mature markets where brand loyalty is high, India’s passenger vehicle market is still evolving. Consumers are lured by price, value for money and fuel efficiency rather than brand loyalty. This is why the risk-reward equation of this collaboration doesn’t look great for Maruti Suzuki at this juncture.

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