New Delhi: Toyota Motor Corp. and Suzuki Motor Corp. deepened their ties by buying small stakes in each other as the two Japanese companies attempt to negotiate the disruptive changes that threaten to alter the existing order in the global automotive industry.

While Japan’s biggest automaker Toyota will acquire a 4.94% stake in Suzuki for about 96 billion yen ($907 million), the latter will buy 48 billion yen worth of shares in Toyota, the companies said in a joint statement on Wednesday.

The equity cross-holdings are aimed at expanding their collaboration that began more than two years ago and will help the companies pool their resources to adapt to a world where on-demand rides, electric vehicles and autonomous cars are changing the industry landscape in ways that few could have anticipated even a couple of years ago.

Apart from manufacturing electric and hybrid models, both companies now plan to jointly develop autonomous driving technology.

Some industry experts said the move to invest in each other may potentially lead to an eventual merger of the two companies.

“This may be a prelude to a bigger participation from Toyota in the stocks of Suzuki Motor. This collaboration will be key for Suzuki to sustain in a world where technology in the automobile sector is evolving rapidly and the company doesn’t have deep pockets," said a person who was associated with Suzuki’s Indian unit for over a decade. “When collaboration between two large corporate entities leads to an equity investment, then it does indicate a certain future."

Toyota and Suzuki first came together in 2017 to develop affordable hybrid and electric vehicles for the Indian market. Toyota had then agreed to supply its hybrid technology to Suzuki as part of the alliance. Subsequently, the companies agreed to sell each other’s products in India and overseas markets.

The partnership will now widen to new areas.

“The two companies plan to establish and promote a long-term partnership for promoting collaboration in new fields, including the field of autonomous driving. The execution of the capital alliance agreement is a confirmation and expression of the outcome of sincere and careful discussions between the two companies, and it will serve for building and promoting their future partnership in new fields," according to the joint statement issued by Toyota and Suzuki.

In December 2009, Volkswagen AG bought 19.9% in the Osamu Suzuki-led company for $2.5 billion, but the alliance soured after the Japanese automaker accused the German company of seeking to control it and filed for arbitration in 2011. An arbitration court ordered Volkswagen to sell its holdings to Suzuki.

The current collaboration between Toyota and Suzuki is different from the one with Volkswagen since both companies have tested the alliance by working together in the past two years and that has been followed by a decision to invest in each other, according to Puneet Gupta, associate director of consulting firm IHS Markit.

“Suzuki needed support to survive in the future and nothing can be better than Toyota since it’s Japanese and there are lots of white spaces where both can complement each other," Gupta said. “If Suzuki, in the long term, is taken over by Toyota, then exchanging a small stake in each other is a good beginning or a first step. Right from dealers to suppliers around the world, (everyone) will get a clear indication that both companies will have a common vision and there will be a lot of synergies."

Toyota and Suzuki are already developing a C-segment sport utility vehicle for the Indian market. The former has also started exporting some of Suzuki’s products such as Alto, Swift and Ciaz to African countries. Suzuki’s India unit has also formed a team of senior executives to oversee development of projects in collaboration with Toyota and gear up for challenges the company may face in the next decade.

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