Toyota Motor Corp. and Suzuki Motor Corp. are on the way to solidify their alliance by taking stakes in one another, pursuing to bolster their position as the auto industry shifts more toward electrified and self-driving cars.
Japan’s largest and leading automaker will acquire around 5 percent of Suzuki shares for about ¥96 billion ($907 million), whilst Suzuki will get a smaller holding valued at about ¥48 billion in Toyota, the automakers stated in statements Wednesday. That is equal to 0.2 percent of Toyota’s shares as of Wednesday’s closing price, before the announcement.
The decision stems out of ties established in 2017 between the two carmakers and is intended to expand their collaboration to keep pace with technological advances sweeping through the transportation industry, from on-demand rides to cars that are not powered by fossil fuels anymore.
For Toyota, the coalition provides access to Suzuki’s expertise in India, which is on track to overtake Japan and become the third-biggest vehicle market in the world.
“Toyota is getting Suzuki at a striking valuation,” said Janet Lewis, an analyst at Macquarie Capital Securities (Japan) Ltd. “It seems 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 percent this year, following a 15 percent drop in 2018 as the Indian economy cooled.
The tie-up highlights the obstacles for automakers as they strive and fight to keep up with the breakneck growth in the industry.
As the industry encounters challenges from ride-sharing services to stricter emission targets, smaller Japanese carmakers are increasingly depending on tie-ups with Toyota to help tackle the problems. Toyota also has stakes in Mazda Motor Corp. and Subaru Corp. and works with them on electric cars.