David Blecken
May 27, 2016

Beyond sex appeal: What partnering with Uber means for Toyota

Toyota's recent investment of an undisclosed sum in Uber is adventurous for a conservative Japanese company, but also looks a sensible step toward much needed modernisation. What does Toyota stand to gain—and are there any risks?

(Photo: Uber)
(Photo: Uber)

According to a statement from Toyota, the partnership will see the two companies work together to establish new services in markets where ridesharing is growing.

Shigeki Tomoyama, a senior managing officer at Toyota and president of its Connected Company division, said in the statement that Toyota “would like to explore new ways of delivering secure, convenient and attractive mobility services”.

The partnership will involve knowledge sharing, development of in-car apps, and a program to sell Toyota and Lexus models to Uber drivers. Toyota owners will be able to pay their leases off by working as drivers for Uber.

In partnering with a ridesharing company, Toyota joins VW, Ford and General Motors (GM). VW has invested in Gett, GM in Lyft, and Ford has partnered with Bridj, a US mass-transit service.

From a pure brand perspective, Toyota “gains more sex appeal” through association with Uber, said David Brabbins, Hong Kong-based associate partner at Prophet, a brand consultancy.

Given that Toyota is the world’s biggest car company and Uber is the leading ridesharing platform, the partnership is “a natural fit that can scale globally”, he said. Brabbins also called the pay-as-you-earn model “innovative”.

Toyota will, however, have to learn how to work with a company with a vastly different culture to its own. “Uber is a disruptive brand, and the process of disrupting established, protected markets is never pretty,” Brabbins said. “Toyota is a conservative organisation, so they will need to become comfortable with the occasional bump in the road that will inevitably happen as a side-effect of Uber’s relentless pursuit of growth.”

At the same time, he predicted those “bumps” would become less frequent as Uber solidifies its lead in the ridesharing category and softens its image.


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More broadly, Brabbins noted: “Carmakers [with the exception of Tesla] need to forge relationships with tech platforms as they haven’t been fast enough to transform themselves”. Both Uber and Toyota also stand to benefit as self-driving cars take hold: Uber from Toyota’s technical expertise, Toyota from operating as Uber’s supplier of choice.

In terms of sales, the move enables Toyota to compete with GM, which hopes to raise urban sales in the US via Lyft. But Issei Matsui, a Tokyo-based independent marketing consultant, said the scope to increase sales in the US market via Uber was limited. While the partnership includes the Lexus brand, selling mass-production models such as the Corolla is unlikely to be very profitable, he said. More valuable would be to use the partnership to generate steady income.

Also important, Matsui suggested, is the potential to use Uber as a communications platform for direct interaction with consumers. He added that while Uber’s service is currently restricted in Japan, it is likely to become part of life in the future, so getting in early and learning from experimentation with technology in the US makes sense, he said.

How much Toyota can really learn from Uber is a matter for further debate. Of course, it’s unlikely to be straightforward. “There are big opportunities, but also many headaches” ahead, Matsui concluded.

 

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