Toyota raising stake in Subaru to at least 20 per cent

Japanese automaker also owns stakes of less than 10 per cent in Suzuki Motor and Mazda Motor

Toyota comes out on top among mass market brands while Mercedes-Benz leads the luxury category. Reuters

Toyota Motor is boosting its stake in Subaru to about a fifth of the smaller automaker, as Japan’s number one car company adds more heft to face a future of self-driving vehicles, electrification and evolving transport services.

The maker of Forester and Outback wagons will also take a stake in Toyota, strengthening their capital ties and collaboration, according to a statement from the companies.

Toyota, which is increasing its holding to about 20 per cent from 17 per cent at a cost of about $700 million at Friday’s closing price, plans to make Subaru an equity affiliate, bringing sales and profit from the automaker onto its income statements.

Toyota, which first took a stake in Subaru in 2005, is spreading its bets. The Japanese carmaker, Volkswagen and other auto companies have been forging partnerships as they face an uncertain future, with new technologies and business models disrupting the $2.23 trillion global auto industry. Toyota is investing in electric and autonomous vehicles, fuel-cell and hybrid cars, as data-intensive connected cars.

"This is part of Toyota's recent efforts to find allies," said Tatsuo Yoshida, auto analyst at Bloomberg Intelligence. "They're getting ready for the next era that includes self-driving technology. Toyota is taking a 360-degree view."

The two companies have jointly developed automobiles since striking up their partnership. Toyota is by far the larger manufacturer, with 10.6 million cars and trucks produced in 2018. Subaru made about 1 million vehicles last year, a decline of 5 per cent and the first drop in seven years.

Toyota also owns stakes of less than 10 per cent in both Suzuki Motor and Mazda Motor.

As part of their pact, Toyota and Subaru will jointly develop all-wheel drive vehicles - a traditional Subaru strength. The companies will also together work on the new Toyota 86 and Subaru BRZ sports cars.

“For Toyota, this alliance brings not just technologies such as Subaru’s i-Sight, all-wheel-drive and flat engines, but also safety and security know-how,” Mr Yoshida said. “It brings in elements that Toyota doesn’t have.”