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Toyota Motor Corp (NYSE:TM) has said that it will increase its stake in Subaru Corp (OTCMKTS:FUJHF) from the current 17% to 20%. The companies announced the news on Friday as they leverage their capacity to maintain an edge in the development of new vehicle tech.

The announcement comes a month barely after Toyota indicated that it would take a small stake in Suzuki Motor Corp (OTCMKTS:SZKMF). Suzuki will also take some equity stake in Toyota.

These kinds of tie-ups demonstrate how automakers are trying to scale up, manage costs as well as enhance development necessary to build electric cars, self-driving, and mobility services. These are the latest trends the global automobile industry is experiencing. Toyota indicated in a statement that this is a period of transformation, and by enhancing ties and aligning the companies’ capabilities, they will be able to make better cars.

Toyota, which is the biggest carmaker in Japan with annual global sales 10x that of Subaru, indicates that the investment will be upwards of $742 million. This depends on the stock market value of Subaru. Subaru will also reciprocate the same and purchase an equity stake of equal value in Toyota.

Smaller car makers such as Suzuki and Subaru are currently struggling to keep up with the growing transformation in the industry. Business is shifting to a model that involves the provision of transport services from just selling vehicles to drivers.

Plan to amalgamate Subaru eventually

The growing partnership with Toyota increases speculation that the company will eventually absorb the small companies in the future. Already Toyota has a huge closely-knit network of various companies that include vendors, commercial vehicle makers as well as suppliers.

Carnorama Consultancy managing director, Takeshi Miyao, indicated that it seems the plan is to make Subaru a fully-owned Toyota subsidiary eventually. This is the first step towards creating ‘mega Toyota. He added all these partnerships are about building scale. The deal expands Toyota’s partners in japan which includes Yamaha Motor Co (OTCMKTS:YAMHF) and Mazda Motor Corp (OTCMKTS:MZDAY).

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