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Toyota Motor Corp. and Suzuki Motor Corp. are strengthening their relationship by taking stakes in each other, the latest alliance in an industry that’s facing sweeping changes in technology, consumer preferences and business models.
Japan’s biggest automaker will acquire about 5% of Suzuki shares for about $907 million (96 billion yen), while Suzuki will get a smaller holding valued at about 48 billion yen in Toyota, the automakers said in statements Aug. 28.
The move builds on ties established two years ago between the two carmakers and is aimed at expanding their collaboration to keep up with electric and self-driving cars, as well as growing demand for on-demand rides and new businesses that are reinventing how people get from A to B. For Toyota, the deal adds yet another automaker to the company’s expanding portfolio of partnerships, which includes Mazda Motor Corp. and Subaru Corp.
Kiyoshi Ota/Bloomberg News
“As the late Sergio Marchionne often reminded his peers, there are too many automakers doing very similar things,” said Ali Izadi-Najafabadi of Bloomberg New Energy Finance’s Intelligent Mobility group, referring to the Fiat Chrysler Automobiles NV CEO who died last year. “Suzuki and Toyota have unique attributes complementing each other.”
Toyota will pay 4,004 yen a share, lower than Suzuki’s closing price of 4,085 yen on Aug. 28. Suzuki shares are down 27% this year, following a 15% decline in 2018 as the Indian economy cooled.
“Toyota is getting Suzuki at an attractive valuation,” said Janet Lewis, an analyst at Macquarie Capital Securities (Japan) Ltd. “It appears to be very similar to the mutual investments made between Toyota and Mazda.”
Suzuki said it will use 20 billion yen 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.
“On autonomy, it makes more sense for Suzuki to rely on Toyota because it requires a lot of time and money,” Izadi-Najafabadi said.
Alliances are becoming ever more critical in the global auto industry, as manufacturers seek to pool resources and save costs. Ford Motor Co. has teamed up with Volkswagen AG, while Honda Motor Co. and General Motors Co. are working together. There’s also the three-way alliance of Renault SA, Nissan Motor Co. and Mitsubishi Motors Corp., which has been on shaky ground since the arrest of former Chairman Carlos Ghosn in November.