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Scion FR-S and Subaru BRZ, why joint venture?

Posted by on March 9, 2012 in New Cars - 2 Comments

What’s going on?

Symbolism is everything… at least when you are Toyota and Subaru and are looking to bring the passion back into affordable hot rods. What happened to the 1990’s when it was about horsepower, torque and cutting off that guy at the stoplight? Where has the fun gone in driving that used to make going to work something to look forward to? Toyota and Subaru have announced a partnership on the development of two sibling vehicles that will be produced on 1 platform; both brands with share a version of the car, each with their own branding and signature additions to keep the cars as unique as possible; despite their mechanical similarities.

Do we really need these cars?

2012-scion-fr-s

2012-scion-fr-s

Introducing the Subaru BRZ and the Scion FR-S; Toyota and Subaru’s answer to a question that most people are not asking right now. So what were they thinking? What is the business model, and why are two competitors teaming up to bring us a fun car that is affordable? There is a giant risk in development of a vehicle that may turn into a fad (smart, mini) but has a downside of complete failure. Despite the huge risk, we’ve seen Toyota invest in vehicles alone and tried the marketplace to see of the new car “Sticks”. Therefore, why hasn’t Toyota created this car themselves and tested the marketplace the way they have done for many years? If they are successful, Toyota stands to make a lot more money and gain far more of the market share than if they team up with Subaru.

Shared Risk

The answer lies in the risk and economic benefit to working with another investor and developer on the product. Toyota has a lot of spare cash to run, but they know very well that a car like this a huge gamble and may end up going nowhere. When there is that big of a downside to an investment in a vehicle, or any investment to be clear, it starts to make sense to bring in another investor to share the risk in case of failure. Additionally, if the cars were to be failing, Toyota will always know that Subaru (who stands behind this car with full interest) will help revive and perhaps invest a second round for better marketing and / or R&D.

Yosef Adelman on Google+

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2 Comments

  1. Posted March 14, 2012 at 10:54 am

    I really like the way you have explained the difference between laying out an investment and going into a Joint Venture, and the difference it can make to Toyota and Subaru.

  2. Posted April 5, 2012 at 9:16 am

    […] reach; or at least a lot less than some of the more powerful and less economical cars such as the Scion FR-S. One of the key features of the Hyundai Accent that makes it such a great purchase is the way the […]

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