The two will also work together to create a hybrid and small SUV for the Indian market and allow Toyota to rebadge the Suzuki Ciaz and Ertiga models in the Indian market and a further four cars for the African markets.
The development is positive in terms of technology transfer from Toyota to Suzuki as their development of hybrid and AI technology is much faster, said Sameer Kalra, Founder, Target Investing.
Toyota will pay around 96 billion yen ($908 million) for a 4.94% stake in Suzuki, while Suzuki will acquire in the market around 48 billion yen ($454 million) worth of shares in Toyota.
Toyota North America CEO Jim Lentz on the automaker's line of cars and trucks, the outlook for the company and why tariffs are the company's biggest concern. "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.
Toyota and Suzuki have announced they will take a financial stake in each other as part of plans to share the cost of developing new technologies.
Following with the investment, both Japanese car-makers confirmed that the new alliance has been created to overcome new challenges facing the industry by "building and deepening cooperative relationships in new fields while continuing to be competitors". There's also the three-way alliance of Renault, Nissan and Mitsubishi Motors, which has been on shaky ground since the arrest of former Chairman Carlos Ghosn in November.
Automakers and tech firms are investing heavily in research and development for autonomous cars and other next-generation vehicles. Since then, relations between the two Japanese automakers have grown closer. Suzuki too has cut global production for the fifth month in a row in June 2019, including in its biggest market India, where vehicle sales have now declined for 10 straight months. Suzuki will put about 450 million dollars of its own money into Toyota.