Toyota Motor Corporation announced plans to extend its position as the largest shareholder of Japanese transportation conglomerate Subaru Corporation. The company stated on Friday that it will be raising its stake in the company from the current 17 percent to 20 percent. Toyota explained that the move is meant to leverage the scales of both companies to enhance the development of new technologies.
The increase in its investments in Subaru comes at the heels of the previous announcement by both Toyota and Suzuki to take on small equity stakes in each other.
Toyota's president Akio Toyoda mentioned in a statement that the bolstering of the companies' partnership is a necessary one to enable everyone to make "ever-better" cars for the new connected, autonomous, shared and electric era.
According to Toyota, the enhanced tie-up will allow them to better manage costs and boost research and development. Smaller companies such as Subaru and Suzuki do struggle to compete with larger companies in terms of the adoption of fast-paced technologies. By tying up with bigger players, Subaru and Suzuki can take advantage of Toyota's massive supply chain and facilities, enabling them to more quickly adapt to industrial and consumer transitions.
In its statement, Toyota revealed that its investment to raise its stake in Subaru will amount to around $650 million. The estimate is based on Subaru's current stock market value. As part of the agreement, Subaru will also be buying a minor stake in Toyota of equal value.
Analysts predict that Toyota may be working towards making Subaru a fully owned subsidiary. The increase of its stake in the company is likely its first step towards that goal. Subaru currently leads the pack in the development of all-wheel-drive technology. The company also has strong sales for its sport-utility vehicles (SUV).
Back in June, Toyota and Subaru had announced plans to co-develop a new electric SUV on a brand new platform. The goal of the partnership for the particular model will be to leverage scale and decrease overall cost. Apart from Subaru, Toyota is forming new partnerships will smaller domestic players. However, plans to forge cross-border tie-ups may eventually become feasible after it successfully integrates with local competitors.
Global carmakers are slowly forging partnerships with their competitors as the strategy has been proven to be quite effective in slashing development and manufacturing costs. With the rapid rise in popularity of newer, and more expensive, technologies such as electric drivetrains and autonomous driving, most companies will have no choice but to collaborate.
