Toyota Motor Corporation will increase its stake with voting rights in Subaru Motor Corporation from its current 16.83% to a minimum of 20% in their new business and capital alliance aimed at further developing their long-term partnership making it the largest shareholder.
In the new agreement, Toyota will acquire through the market and/or through a negotiation transaction 24,289,500 shares in Subaru which based on the last market data on 31st March, 2019, roughly translate to 3.17% stake in the company.
Toyota will invest an estimation of 80 billion Yen ($742 million) and Subaru will also in turn acquire a stake of similar value in Toyota. This is a similar arrangement to the one Toyota announced with Suzuki Motors on 28th August, 2019. Suzuki too, has at least around 1.4% stake in Subaru Motor Corporation.
What Should We Expect from This Partnership?
Subaru and Toyota have long been working together, since around 2005 when Toyota first acquired 9.5% stake in then, Fuji Heavy Industries, before it changed its name to Subaru Motor Corporation in 2017.
The two have worked on cars like the rear wheel drive Toyota 86 and Subaru BRZ, which they intend to keep developing jointly and revamp for the next generation according to the terms of their agreement. Both have also contracted each other to produce and supply vehicles on occasion.
The main driving factor of the alliance is to respond to the increasing changes in the automotive industry which have led to CASE (Connected, Autonomous, Share and Electric) vehicle technologies.
This shouldn’t come as a surprise since in June, 2019; the two car manufacturers agreed to jointly develop a platform dedicated to Battery Electric Vehicles (BEVs) and to jointly develop a BEV model, which will employ Subaru’s AWD technologies and Toyota’s vehicle electrification technologies.
BEV might power the reported all electric SUV the two announced they were working on. Among the plans, Toyota will expand its experience and supply of hybrid drivetrain systems to a wider range of Subaru vehicles whereas Subaru will share their development of all-wheel-drive technologies (AWD) considered to be among the best in the world and in its field.
“I, myself, am a rallyist, and, through my experience of training hard in an Impreza, I have felt in my veins the wonders of Subaru’s AWD technologies. Meanwhile, we at Toyota have been going all out to hone our all-wheel-drive technologies by participating in the World Rally Championship, among other activities,” – said, Akio Toyoda, Toyota’s President in the press statement.
Subaru is mostly known for its models, the Impreza, Legacy and crossovers like the Outback and Forester. It equips them with horizontal boxer engines, EyeSight autonomous driver assist and AWD technologies.
Recently the company has been shifting from performance machines to lifestyle products which are more comfortable and are enjoyable to drive as a routine mode of transport, a business and marketing technique that has worked particularly well in the US.
Toyota is the largest manufacturer in the world, followed only by Volkswagen (VW). In 2018, it manufactured 10.6 million cars and trucks and sold an estimated 8 million of them compared to Subaru which made only 1 million vehicles in the same year, a 5% drop and first decline in seven years.
Similar mergers are happening all over the automotive industry, so as to cut costs, share technology and ensure the survival of smaller car manufacturers. Toyota already has other partnerships with Yamaha Motor Corp and Mazda Motor Corp, and for some reason it has preferred expanding with Japanese partners rather than beyond its borders as other international brands are doing.
Honda has a partnership with General Motors, Rival Nissan Motor Company has an alliance with Renault and Mitsubishi Motors Corporation (30%). VW (which probably owns the most car companies and brands in the world) made a partnership with Ford Motor Company to jointly develop electric and self-driving cars.
The deal between Toyota and Subaru will be finalized when the regulatory authorities in Japan give it a green light.
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Lawrence writes about tech, lifestyle, politics, business, crypto and occasionally entertainment. He writes for Newslibre and Spur Magazine while consulting with numerous international companies on strategy, community management and marketing.
He has contributed to the journalism, open source, film, youth, web, Andela and Mozilla communities.