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Toyota said on Wednesday it will take a nearly 5% stake in small-car specialist Suzuki Motor, the latest tie-up in the rapidly changing global auto industry.
The Japanese auto giant, maker of the Prius and Camry models, will pay some $907-million for 4.94% of Suzuki. The smaller partner in turn will buy Toyota shares worth 48 billion yen through the market, which amounts to roughly 0.2% of the firm.
Toyota and Suzuki had in 2017 signed a memorandum of understanding to discuss an operational tie-up.
The announcement comes as the global auto business undergoes dynamic changes, brought on by tougher environmental regulations, and new market entrants such as tech firms developing driverless vehicles.
These new factors posed "a turning point unprecedented in both scope and scale" for the business, the two firms said in a joint statement.
By teaming up, they will tackle "this transitional era" to promote tie-ups in new fields like autonomous vehicles.
Toyota offered engineering prowess, such as hybrid technology, while Suzuki, which enjoys enormous successes in India, has voiced concerns about staying competitive on its own.
Toyota is among the world's biggest automakers, boasting brands like Lexus, but also small-car producer Daihatsu and truck maker Hino.
In 2017, Toyota signed a capital alliance with smaller rival Mazda. Toyota is also the biggest shareholder of automaker Subaru.
Industry pressure
David Leggett, Automotive Editor at GlobalData, a leading data and analytics company, offers his view: "Industrial pressures and the need to control costs - especially in developing expensive advanced technologies - are driving automotive companies to consider collaborating. Selective collaborations between companies are a relatively low-risk and manageable way to achieve synergistic benefits without the political turmoil that can come with proposed mergers and acquisitions.
"The industrial and competitive backdrop is compelling. Automotive companies have to invest huge sums in developing new technologies such as electrified powertrains, automated driving systems and connected services."
In this case, Suzuki lacks the size and resources to go it alone but in working with Toyota it can benefit from Toyota’s strength and scale in electrification technologies. Toyota gets the benefit of Suzuki’s strong presence in compact vehicle segments and technologies; it is also market leader in India, a key emerging market for the 2020s.
Leggett said: "The two companies have already announced the cross-supply of selected vehicles, technologies and powertrains in Europe and India to lower costs and raise capacity utilisation at manufacturing plants. They are moving forward with their alliance.
"The shareholding announcement serves to cement the deepening relationship between the two companies."