- Toyota announced Aug. 28 it was acquiring a 4.94% stake in Suzuki for 96 billion yen, or $910 million.
- The smaller automaker said it would purchase 0.2% of Toyota's outstanding shares for 48 billion yen, or about $455 million.
- Toyota also holds a 5% stake in Mazda while the Hiroshima-based automaker has a 0.25% holding in the bigger company.
Toyota CEO Akio Toyoda is an avid motorsports fan who routinely heads out on the track to test the company's latest products, especially high-performance models like the new Supra sports car and the smaller Toyota 86.
So there was no surprise when he highlighted some of the benefits of an expanded relationship with smaller Japanese automaker Subaru last month, notably including plans to jointly develop a new version of the Toyota sports car and the near-twin Subaru BRZ.
"During this once-in-a-century period of profound transformation, driving enjoyment will remain an inherent part of automobiles and is something that I think we must continue to strongly preserve," the grandson of Toyota's founder said in a statement.
But the development of the two next-generation sports cars is really only a small part of Toyota's decision to expand its stake in Subaru from 17% to 20%. It's that profound transformation of the industry, including the push into electric, connected and autonomous vehicles that has caused the Japanese automotive giant to rethink a fundamental tenet of its long-term strategy.
"They have changed from ultra-conservative to ultra-aggressive" when it comes to alliances, said Michael Dunne, a veteran Asian auto industry analyst, and CEO of Zozo Go, an auto consulting service that specializes in Asia.
The deal with Subaru also sees the smaller carmaker take a minor stake in Toyota. The two companies plan not only to develop the next-generation 86 and BRZ sports cars but also some as yet-unspecified all-wheel-drive models. And they plan to work together on a variety of new technologies, including electrified and self-driving vehicles.
The alliance with Subaru is just the latest that Toyota has announced. Among others:
- Toyota announced Aug. 28 it was acquiring a 4.94% stake in Suzuki for 96 billion yen, or $910 million. In turn, the smaller automaker said it would purchase 0.2% of Toyota's outstanding shares for 48 billion yen, or about $455 million.
- Toyota also holds a 5% stake in Mazda while the Hiroshima-based automaker has a 0.25% holding in the bigger company. Among other things, the alliance formed in August 2017 sees the two companies partner on a new plant in Alabama that will assemble several jointly developed vehicles.
- As part of what Toyota describes as a "binding agreement and MOU on collaboration," it teamed up with BMW to develop the newly reborn Supra sports car, along with the Bavarian automaker's latest version of the Z4 roadster, both of which share key underpinnings.
- The Japanese automaker formed a small alliance with PSA, the parent of Peugeot and Citroen, in 2012, significantly expanding it six years later. Among other things the new deal has PSA supplying Toyota with a new compact commercial van.
Some alliances are pragmatic efforts aimed at helping Toyota expand its presence in markets where it is weak, Suzuki helping it gain a foothold in booming India. And the relationship with PSA has addressed Toyota's weaknesses in Europe, especially its need for diesel engines.
There's another common thread to many of Toyota's joint ventures, industry analysts point out. In today's increasingly fragmented market, it can be far too costly for a single automaker to justify the development of low-volume products, especially sports cars. By sharing costs, it makes it easier to pencil an acceptable business case.
"What has changed is the industry and the market and what is needed to succeed," said Stephanie Brinley, principle analyst IHS Markit. "You need access to skill set you may not have in house."
That's also true when it comes to the development of all the new technologies that automakers have to focus on today, said Dunne, including the autonomous and battery-powered vehicles that aren't likely to start generating profits for a number of years.
"As the environment which surrounds the automobile industry has been changing drastically, we need to have the ability to respond to changes in order to survive," Toyota CEO Toyoda said in a statement following announcement of a preliminary deal with Suzuki. Such deals expand the potential payoff of "the R&D which each company is working on individually," he added.
Toyota has had a few long-term relationships, notably an alliance with Daihatsu largely focused on Japan's unique Kei-car, or microcar, market. But even there, Toyoda decided to step things up, completely buying out Daihatsu in 2016.
It is clearly stepping up its game. And it is not limiting its alliance strategy to working with other, direct competitors. Toyota announced in August last year that it would invest $500 million in the ride-sharing giant Uber, an alliance focused on the development of autonomous vehicles.
Once rare, partnerships have become more and more the auto industry norm over the last several decades, especially since Toyota's closest Japanese rival, Nissan, was bailed out from an all but certain collapse back in 1999, forming what was initial known as the Renault-Nissan Alliance. Mitsubishi has since become the third leg in that stool.
Japan's number three automaker, Honda, has announced two major alliances with General Motors over the last several years and, as has become the norm, they focus on future technologies including hydrogen fuel cells and autonomous vehicles.
For its part, Toyota long downplayed alliances because it felt it could fund pretty much everything on its own as one of the world's wealthiest automakers, said Dunne. Its pockets remain deep — it closed the last fiscal year, ending March 31, with net income of 1.88 trillion yen, or $16.98 billion. But that was down 25% from the prior year, and higher spending on the development of future technologies was among the various factors contributing to that decline, the company reported.
So, even with its deep pockets, sharing costs with other automakers is a way "to get the best economies of scale," said Scott Vazin, the company's U.S. corporate communications chief.
What's unusual said Dunne, is the sheer number of alliances Toyota has formed. And from that perspective it is operating "more like the culture of Silicon Valley, in sharp contrast to the narrower approach normally taken by the auto industry. They're placing multiple bets, expecting some might fail but assuming that some of them will clearly pay off."