Why Toyota and Mazda are teaming up to develop electric cars

Reuters

President Donald Trump had criticized Toyota and other automakers for taking auto production and jobs to Mexico, saying vehicles for the USA market should be built by US workers.

Toyota Motor Corp (NYSE:TM) and Mazda Motor Corp (TYO:7261) are planning to build a new plant in the U.S., with hopes to open in 2021.

US President Donald Trump has been urging Toyota and other Japanese automakers to invest and build more vehicles in the US.

The companies also plan to work together on various advanced auto technology, such as electric vehicles, safety features and connected cars, as well as products that they could supply each other, they said.

"Toyota and Mazda have been working more closely together, so it is no surprise they will have a plant together", Autotrader.com analyst Michelle Krebs told USA Today about the deal. It'll be the home for Toyota's Corolla for North American sales, as well as new Mazda crossovers.

Toyota Motor Corp. and Mazda Motor Corp. plan to form a capital tie-up to jointly deal with stricter worldwide environmental regulations, sources said August 4.

The joint announcement from the two companies said they had agreed to enter a partnership but did not confirm that the proposed plant would be built, as the President's tweet suggested.

Toyota plans to acquire 31,928,500 shares of common stock newly issued by Mazda through a third-party allotment, which will amount to a 5.05 percent stake in Mazda, valued at 50 billion yen ($455 million).

Shares in Mazda, which has no United States plant, soared more than 5 percent in Tokyo trade early Friday while Toyota was marginally lower.




Mazda, whose sales are an eighth that of Toyota, says it lacks the funds to develop electric cars on its own. Mazda has not made cars in the US since a joint partnership with Ford unraveled earlier this decade.

"There will be no substantial impact on Toyota's investment and employment plan there", the Japanese vehicle manufacturer said.

Toyota, along with German and Asian automakers, have during the past 30 years built a second auto industry in the United States, rivaling the US operations of the Detroit Three automakers in size and employment, but with newer, and far less unionized, plants. Toyota now sells a version of the Mazda 2 rebranded as the Yaris iA in North America, and under the new deal, Toyota will supply a box truck to Mazda for the Japanese market.

Mazda entered the USA market in as Mazda Motor America in 1970.

Toyota began its manufacturing operations in the United States in 1972.

However it's not only electric cars that will benefit from the partnership.

He has strongly criticised Toyota over its ongoing project to build a new factory in Mexico, threatening it with tariffs.

The union has struggled to expand beyond its stronghold at Detroit automakers to foreign-owned plants, especially in the southern US.

Toyota, Japan's biggest carmaker, has been forging alliances with smaller Japanese rivals for several years.

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