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$1.6 Billion U.S. Plant To Be Built And Electric Cars To Be Developed As Toyota And Mazda Link Up

$1.6 Billion U.S. Plant To Be Built And Electric Cars To Be Developed As Toyota And Mazda Link Up
As part of an alliance that will also see the Japanese automakers jointly develop electric vehicle technologies, Toyota Motor Corp and Mazda Motor Corp plan to build a $1.6 billion U.S. assembly plant, the two said on Friday.
Extending its dominance in Japan's auto sector. Mazda will take a 0.25 percent share of its larger rival, the world's second-largest automaker by vehicle sales last year, will take a 5 percent share of Mazda, as the two companies will take small stakes in each other as part of the tie-up.
U.S. President Donald Trump had campaigned on promises to increase manufacturing and expand employment for American autoworkers and the plant be a boost to him which is something of a surprise at a time of overcapacity in the U.S. market.
Planned to be operational in 2021, with production divided between the two automakers, and employ about 4,000 people, the plant will be capable of producing 300,000 vehicles a year.
At present, the industry is struggling with hefty research costs and intense competition from technology companies over technology like self-driving cars and the tightening of global emissions regulations is prompting more automakers to develop battery powered cars, and it is amidst this global auto environment that the electric vehicles cooperation is being planned.
Development of in-car information technologies and automated driving functions would be conducted by Toyota and Mazda as part of the agreement.
With the aim of effectively engineering a loose consolidation of the Japanese auto sector, for several years, Toyota, Japan's biggest auto company, has been forging alliances with smaller Japanese rivals. Along with a development partnership, it also owns a 16.5 percent stake in Subaru Corp, Japan's No. 6 automaker.
And as Toyota seeks to tap its smaller rival's expertise in emerging Asian markets, Toyota is also courting compact car maker Suzuki Motor Corp to cooperate on R&D and parts supply.
One analyst said that prevention of future incursions by tech companies may also be provided by a stake in Mazda to Toyota.
"For a technology company which lacks the expertise in making cars, Mazda could look like a very interesting acquisition. They're very good, they're not too expensive. Maybe Toyota realizes this," CLSA managing director Chris Richter said.
"By buying a 5 percent stake, Toyota takes Mazda off the table rather than having it sit out there like a free agent which could someday be used against them."
The small automaker – Mazda, is allowed a production foothold in the United States, due to the deal with Toyota. from its plants in Japan and Mexico, Mazda currently ships all vehicles sold in the country.
Mazda has said that it lacks the funds to develop electric cars on its own, a view shared by Subaru and Suzuki, as the company has an R&D budget of just around 140 billion yen ($1.27 billion) this year which is a fraction of Toyota's 1 trillion yen.
"Mazda needs electrification technology. In the past they've pooh-poohed EVs, they've felt that they can make internal combustion engines more efficient, but the bottom line is that globally you need to have this technology," said Janet Lewis, head of Asia transportation research at Macquarie Securities.

Christopher J. Mitchell

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