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

The Japanese auto giants agreed to establish a £1.6bn joint venture plant in the USA with equal funding contributions, with the goal of beginning operations in 2021 and eventually producing 300,000 vehicles a year.

The President had also said Toyota would face hefty tariffs for cars built in Mexico if it exported them to the US.

But Corolla output, and a new Mazda crossover, will now be shifted to the planned USA assembly plant.

Apart from this, Toyota and Mazda, as part of the agreement will also work together to produce automated driving functions and in-car information technologies. Toyota intends to build the Corolla there, while Mazda will use the new facility to make crossovers.

President Donald Trump at a rally Thursday in Huntington, West Virginia.

Trump's pressure to build more vehicles in the USA may have affected the timing of Mazda's decision to start manufacturing cars in the US, as well as Toyota's decision to boost its presence, said John Shook, chief executive of the Lean Enterprise Institute in Cambridge, Massachusetts. Toyota will have a five percent share of Mazda whilst Mazda will take a 0.25 percent share of Toyota.

Toyota and Mazda are forming a capital alliance and splitting the cost for the plant equally.

In the past, Toyota was not overly bullish on electric vehicles, which have a limited cruise range. Currently, Mazda ships all cars to the US from its factories in Japan and Mexico. "With the investment", the AP said, "both automakers can hope to prove their good American corporate citizenship and appease the Trump administration's concerns about jobs moving overseas".

"Mazda has been studying the Toyota Production System, with direct help from Toyota, since the 1970s", said Shook, a former Toyota engineer. At the time, the automaker was considering making cars for the US market in Mexico.

Sales in China, the world's top auto market followed by the United States, was a bright spot for Mazda, rising 20 percent to 71,000 units, lifting the automaker's global sales by 1 percent. Neither brand has anything mainstream enough to take on Nissan's Leaf, for example, and European manufacturers are busy surging their electric vehicle development processes.

Toyota is also courting compact vehicle maker Suzuki Motor to cooperate on R&D and parts supply as Toyota seeks to tap its smaller rival's expertise in emerging Asian markets. Their alliance led world vehicles sales for the first time in the first half of this year.

Toyota said it is assuming an average USA dollar rate of 110 yen and euro rate of 124 yen for the year, compared to earlier estimates of 105 yen and 115 yen, respectively.

Sales of small cars have slumped in the USA amid steadily low gas prices.

According to Reuters, Mazda, who has sales are one eighth of Toyota's, only has a research budget of 140 billion yen per year - compared to Toyota's one trillion yen.

  • Anthony Vega