Toyota, Mazda to form capital alliance to jointly develop electric vehicles

Toyota Motor Corp. and Mazda Motor Corp. are set to form a capital alliance to boost joint development of electric vehicles, sources close to the matter said Friday.

Japan’s largest carmaker is mulling taking a roughly 5 percent stake in Mazda, while Mazda may also invest in Toyota, the sources said.

The two automakers are expected to announce the plan later in the day. Toyota is scheduled to release its earnings results for the April-June period on Friday afternoon.

Global carmakers are facing growing costs to comply with stricter emission and other environmental regulations. Toyota and Mazda decided to deepen their partnership to survive the intensifying competition for developing the self-driving technology and environment-friendly vehicles, the sources said.

Toyota is aiming to fully enter the EV market by 2020 and Mazda aims to start selling EVs in the United States in 2019. The two companies are likely to cooperate in the U.S. market, possibly launching a joint venture in the United States to build a large factory capable of producing up to 300,000 sport utility vehicles, according to the sources.

In 2015, the two carmakers announced that they would expand their partnership to cooperate in developing environmentally friendly and safe-driving technology.

Toyota has fallen to third place in global sales in the first six months of this year, behind Germany’s Volkswagen group, with the Renault-Nissan alliance becoming the world’s top auto seller for the first time after its addition of Mitsubishi Motors Corp.

The capital tie-up between Toyota and Mazda indicates the auto industry could still see more reorganization in the face of tougher competition in developing new technologies.

The influence of technology firms in the industry has also grown with Google Inc. entering the race to develop automated car technology while U.S. electric vehicle maker Tesla Motors Inc. is showing rapid growth. Chinese rivals are also becoming a threat to Toyota.

Mazda is known for its strength in car designs and diesel engines, but has seen slow progress in developing technologies for self-driving cars and green vehicles.

Through a capital tie-up, the two automakers are aiming to cover for each other’s weak points to become a leader in next-generation technology and establish a stable revenue base.

Toyota has been forging alliances with domestic rivals in an effort to boost competitiveness. In 2016, Toyota made Daihatsu Motor Co., which has strength in minivehicles, a wholly owned subsidiary. Toyota has also invested in Subaru Corp. and Isuzu Motors Ltd., while it is currently mulling a tie-up with Suzuki Motor Corp.

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