Toyota and Suzuki are strengthening their alliance by taking stakes in one another, seeking to bolster their position as the auto industry shifts further toward electrified and self-driving cars.
Japan’s biggest automaker will acquire about 5% of Suzuki shares for about ¥96bn, while Suzuki will get a smaller holding valued at about ¥48bn in Toyota, the automakers said in statements Wednesday.
The move builds on ties established in 2017 between the two carmakers and is aimed at expanding their collaboration to keep up with technological advances sweeping through the transportation industry, from on-demand rides to cars that are no longer powered by fossil fuels. For Toyota, the alliance provides access to Suzuki’s expertise in India, which is on track to overtake Japan and become the third-largest vehicle market in the world.
“Toyota is getting Suzuki at an attractive valuation,” said Janet Lewis, an analyst at Macquarie Capital Securities (Japan). “It appears to be very similar to the mutual investments made between Toyota and Mazda.”
Toyota will pay ¥4 004 a share, lower than Suzuki’s closing price of ¥4 085 on Wednesday. Suzuki shares are down 27% this year, following a 15% decline in 2018 as the Indian economy cooled.
Suzuki said it will use ¥20bn of the proceeds on development of new technologies including autonomous driving, and the remainder to replenish its capital.
Suzuki is seeking to team up with a larger carmaker after an acrimonious split with Volkswagen AG. Toyota has budgeted about seven times more on research and development than Suzuki for this fiscal year, and the smaller automaker has pointed to the soaring cost of making competitive cars as a reason to join forces with a partner.
In February 2017, Toyota and Suzuki agreed to begin “concrete examination” of a partnership in technology and procurement. A year later, they agreed to sell each other’s hybrid cars and other vehicles in India. This March, Toyota further expanded the alliance to supply its hybrid system to Suzuki globally, while Suzuki will sell compact vehicles through Toyota in India and Africa. The carmakers also said they plan to produce joint battery electric cars in India around 2020.
As the industry face challenges from ride-sharing services to stricter emission targets, smaller Japanese carmakers are increasingly relying on tie-ups with Toyota to help tackle the issues. Toyota also has stakes in Mazda and Subaru and works with them on electric cars.