Toyota, Suzuki partnership makes sense, analysts say

Rival Japanese automakers Toyota and Suzuki have initiated formal talks on a wide-ranging strategic partnership, and analysts are welcoming an alliance.

Executives at the carmakers are exploring the possibility of cooperation in areas such as shared procurement, environmental and safety technologies and in IT.

Suzuki Motor Corporation logo is shown on display at the 2016 Tokyo Auto Salon car show on January 15, 2016 in Chiba, Japan.
Christopher Jue | Getty Images
Suzuki Motor Corporation logo is shown on display at the 2016 Tokyo Auto Salon car show on January 15, 2016 in Chiba, Japan.

"I am truly thankful for having been given this opportunity to work together with a company such as Suzuki, which overflows with the spirit of challenge," Toyota President, Akio Toyoda, said in a news release.

While key elements of the partnership are still lacking detail, the move to begin "concrete examinations" of a deal comes after the two carmakers said in October that they were considering a formal tie-up.

"Toyota was enthusiastic throughout our discussions regarding partnership, even though such was sought by Suzuki, which was concerned about the development of advanced technologies," Suzuki Chairman, Osamu Suzuki, said in the release.

The manufacturers are also looking at opportunities to partner on the mutual supply of products and components, but no formal detail has been announced.

Analysts have been positive on the partnership, particularly regarding Suzuki gaining access to Toyota's leading technology as well as its capabilities in research and development.

It's a field where Suzuki has struggled to keep pace in recent years, experts said.

In turn, Toyota stands to benefit from Suzuki's market expertise and share in different regions— such as India, which now accounts for around half of Suzuki's total global sales.

"Toyota is very weak in India," said SBI Securities analyst Koji Endo.

"Suzuki is OK for the time being as its affiliate, Maruti India, is making record-high profits."

Toyota has been bolstering its efforts to form alliances with rival automakers to maintain growth and influence, as new market participants like tech companies bring fresh and tough competition to the space.

Toyota has also been investing in the development of new technologies, such as autonomous vehicles.

"Suzuki is a fairly small automaker and more stringent safety and fuel efficiency regulations around the world, not to mention changing consumer tastes, demand large R&D budgets as well as enormous production requirements to increase economies of scale," said IHS Automotive analyst, James Chao.

"Suzuki doesn't have either of these—but Toyota can help."

Toyota aims to double its share of India's passenger vehicle market to 10 percent by 2025, but any synergies as a consequence of the deal are likely to be hard won.

"It's extremely difficult to do this, especially given that you are dealing with two widely different company cultures. Suzuki tried this before, with VW, which did not end positively," Chao said.

—Wires contributed to this report.

Follow CNBC International on Twitter and Facebook.