Auto makers seeking alliances to consolidate their position in Indian market

The German luxury car maker, BMW and Japanese auto giant, Toyota came up together in June 2012 and declared a global alliance between both the companies. This Joint Venture will design performance oriented sports cars and will develop fuel-cell technology as well as e-vehicle architecture. The interest of both the companies in working together was represented after they agreed to employ efforts on next-generation lithium-ion battery cells earlier this year.

However, Toyota and BMW work with two different ideologies. BMW is a well-established auto marque with plenty of luxury, comfort and attitude. On the other hand, Toyota is a conservative Japanese car manufacturer, which works on the principle of moving slow-and-steady as the key to success.

Deepesh Rathore, Director India (Automotive), IHS Global Insight, a research firm, quoted, “We have had this wave of M&As in the auto industry. That has cooled down with many M&As not working out. Now, auto firms have become wiser. They prefer live-in relationships rather than go for messy marriages.”

The trend in international auto industry is changing at a fast rate. This statement is supported by Toyota, which used to move at a slow pace and preferred settling things on its own is now changing tracks and pacing up. The company has now expanded its wings and is working in a web of associations for its growth. Toyota has an alliance with Ford to manufacture hybrid trucks and will soon start operations on electric cars with Tesla Motors. The car maker is also going in a JV with Intel for designing car infotainment systems and in order to power smart cars, it is partnering with Microsoft.

Michelle Krebs, a Senior Analyst of auto industry, said, “With the cost of developing vehicles so high, returns on investment so slim, profit margins in the auto industry are very thin.”

Toyota is not the only auto maker which is buzzing around to form partnerships or alliances; it is just one of the several auto makers who are coming together to consolidate their joint entities. Another struggling Japanese company Mazda is working with the Italian auto giant, Fiat, to make the market situation favourable for both the companies. Following the league, General Motor’s Opel is forming an alliance with the French auto entity PSA Peugeot Citroen to work together and strengthen their position in the auto industry.