Toyota, Suzuki in talks to acquire small equity stakes in each other

Toyota Motor Corporation and Suzuki Motor Corpotation will take small equity stakes in each other, the Japanese car makers said, as they seek to develop newer technologies and meet sweeping changes upending the global auto industry.

The tie-up is the latest example of automakers chasing scale to manage costs and boost development. Car makers, especially smaller ones like Suzuki, are struggling to meet the breakneck growth of an industry transformed by the rise of electric vehicles (EVs), ride-hailing and autonomous driving.

Toyota President Akio Toyoda and Suzuki Chairman Osamu Suzuki were present at a news conference in Tokyo on Wednesday. Toyota will pay around 96 billion yen ($910 million) for a 4.94% stake in Suzuki, while Suzuki will acquire in the market around 48 billion yen worth of shares in Toyota. That is equivalent to 0.2% of Toyota’s shares as of Wednesday’s closing price, before the announcement.

The companies said in a joint statement they intended to overcome challenges facing the industry by “building and deepening cooperative relationships in new fields while continuing to be competitors”. They said they would strengthen technologies and products in which each of them specialise in.

The firms had said in 2016 they were exploring a partnership, citing technological challenges and the need to keep up with industry consolidation. Earlier this year they said they would produce EVs and compact cars for each other.

Automakers around the globe have been joining forces to slash development and manufacturing costs of new technology. Ford Motor and Volkswagen have said they will spend billions of dollars to jointly develop electric and self-driving vehicles.

Shares of Toyota and Suzuki closed little changed before the announcement.

The deal brings Suzuki firmly into Toyota’ orbit, alongside Daihatsu Motor, Hino Motors, Subaru Corporation, Mazda Motor Corporation and Yamaha Motor.

Rival Nissan Motor Co has an alliance with France’s Renault, although that has been shaken following the ouster of former Chairman Carlos Ghosn, and with Mitsubishi Motors Corporation. Honda Motor has a tie-up with General Motors.

Toyota has been looking to expand scale in next-generation technology and said this year it would offer free access to patents for EV motors and power control units. It believes that move would help it cut by as much as half the outlays for expanded electric and hybrid vehicle components in the United States, China and Japan.

Supplying rivals would greatly expand the scale of production for hardware.

Suzuki, which specialises in affordable compact cars, had been struggling to keep pace with the huge costs of investing in research and development for automated driving functions.

Toyota said in June it aims to get half of its global sales from electrified vehicles by 2025, five years ahead of schedule, and will tap Chinese battery makers to meet the accelerated shift to electricity-powered cars.

Meanwhile, Japan’s Nikkei share average edged lower on Thursday, as an early Wall Street-led bounce gave way to lingering concerns that trade conflicts and political risks would hurt the global economy.

The Nikkei ended the session down 0.09% at 20,460.93, having advanced a modest 0.15% the previous day. The index rose as much as 0.2% in early trade after all three of the major US stock indexes posted gains overnight.

But the Nikkei’s rise sputtered on underlying concerns about another flare-up in the US-China trade war and latest developments in the Brexit saga pointing to fresh turbulence in the financial markets ahead.

“The market can’t get much of a lift as it waits for Sept. 1 to see if extra US tariffs on Chinese imports actually kick in,” said Yutaka Miura, senior technical analyst at Mizuho Securities.

“US trade adviser Peter Navarro’s cautious comments on trade issues also weighed on sentiment,” Miura said.

Global markets remain on edge after the latest flurry of tit-for-tat tariffs between Washington and Beijing, and the lack of firm details on the next round of trade talks between the two countries did little to ease nerves.

“I can tell you that it’s unlikely anything quick will happen given the structural basis of the problems,” White House trade adviser Peter Navarro said in an interview with Fox Business Network on Wednesday. There were 127 advancers on the Nikkei index against 87 decliners. The largest per centage decliner was staffing services company Recruit Holdings Co, which retreated 4.8% after it announced plans to sell approximately 7.16% of its outstanding shares through a secondary offering.

Reuters