What is fueling Toyota's interest in Suzuki? India

TOKYO — The world's biggest automakers have tried partnering with Suzuki Motor Corp. over the years. First came General Motors, then Volkswagen. Now, it's Toyota's turn.

Toyota Motor Corp. deepened its ties with the Japanese small-car specialist last week, announcing it will spend ¥96 billion ($906.8 million) to take a 4.9 percent stake in the company, aiming to succeed where its American and German rivals failed.

Why are these global goliaths so interested in pint-sized Suzuki?

In one word: India.

The subcontinent is the world's No. 4 market and is on pace to supplant Japan as No. 3 behind China and the U.S.

Suzuki — through its Maruti Suzuki India subsidiary — has locked up about 46 percent of the country's passenger vehicle sales. Even Toyota struggles by comparison.

The announcement of a capital alliance between the carmakers helps cement a bond that Toyota President Akio Toyoda and Suzuki Chairman Osamu Suzuki kicked off in October 2016.

As part of the latest agreement, Suzuki will also buy a token stake in Toyota.

But even before the capital tie-up, the partnership was helping Toyota in India. This year, Suzuki agreed to supply Toyota two compact vehicles for sale in India, and to assign production of a Suzuki compact SUV to a Toyota plant in India. They also agreed that Toyota will promote hybrids in India by locally procuring components.

Outside India, Toyota and Suzuki might seem like an odd couple.

On the global stage, Suzuki remains a bit player. It abandoned the U.S. in 2012 and exited China last year, effectively conceding defeat in the world's two biggest battlegrounds.

But even beyond India, Toyota will reap other benefits from teaming with Suzuki.

The first is a front-row look at how Suzuki engineers and produces low-cost vehicles for emerging markets. Those regions are expected to drive global sales growth in the coming decades, and Suzuki has largely cracked the code for selling quality econocars in them.

Suzuki also brings added scale.

Toyota has big volume by itself. But it is achieving unrivaled scale by assembling a broad alliance of automakers that includes capital stakes in Subaru, Mazda, Daihatsu and now Suzuki.

That Toyota-affiliated group has a combined production volume of more than 16.5 million vehicles a year.

Indeed, in announcing their latest deal, Toyota and Suzuki voiced urgency in the need to collaborate on electrification and autonomous driving.

"The automobile sector is currently experiencing a turning point unprecedented in both scope and scale, not only because of enhanced environmental regulations, but also from new entries from distinct industries and diversified mobility businesses," the companies said in a joint statement. "To take up challenges together in this transitional era, the two companies plan to establish and promote a long-term partnership."

Just how long-term is yet to be seen.

For years, Suzuki worked with its part owner GM, which eventually raised its stake in Suzuki to 20 percent. GM sold its last remaining shares in 2008 as it rushed to raise cash on the eve of its bankruptcy.

A year later, Suzuki paired with Volkswagen in a partnership that soon hit the rocks over conflicting corporate cultures and jousting for control. Suzuki in 2015 won a ruling from arbitrators that forced VW to sell back the 19.9 percent stake it took in the Japanese company.

Toyota may have better luck. It has a track record of hands-off, loose cooperation with other automakers, notably Mazda, Subaru and Daihatsu. And as two Japanese companies headquartered outside the Tokyo region, Toyota and Suzuki share a mindset making them less prone to culture clash.