Will Subaru become a Toyota subsidiary?

By REUTERS September 30,2019

Toyota and Subaru in June announced they will jointly develop this electric-powered SUV.

FROM around a 17% share in Subaru, Toyota Motor Corp. will raise this stake to 20%, the two companies announced over the weekend. The move is meant to leverage their scale so they could better compete in developing new vehicle technologies.

The investment comes a month after Toyota and another smaller Japanese automaker, Suzuki Motor Corp., said they would take small equity stakes in each other. Such tie-ups highlight how automakers are scrambling to chase scale, manage costs and boost development required to develop self-driving cars, electric vehicles and new mobility services which are upending the global auto industry.

With the move, will Subaru eventually become a subsidiary of Toyota?

Traditional carmakers, especially smaller ones such as Subaru and Suzuki, are struggling to meet the fast pace of change in an industry shifting to a business model of providing transportation services from simply selling cars to drivers.

Their deepening partnerships with Toyota, which already oversees a vast, closely knit network of group companies that include suppliers, vendors and commercial vehicle makers, has raised speculation that these smaller automakers may be absorbed into the Toyota fabric in the future.

“The plan appears to be to ultimately make Subaru a fully owned subsidiary, to help create a ‘mega Toyota’. This is the first step toward that,” said Takeshi Miyao, managing director of consultancy Carnorama. “It’s all about building scale.”

But Subaru president Tomomi Nakamura was adamant that his company would remain independent for now.

“I can assure you that there was absolutely no talk of Subaru becoming a Toyota subsidiary … either from our side or theirs,” he said.

Toyota, whose annual global vehicle sales are 10 times that of Subaru, said its investment would amount to up to $742 million based on Subaru’s stock market value. The smaller automaker will reciprocate by buying a stake in Toyota of equal value.

Toyota and Subaru in June said they planned to jointly develop an electric SUV on a platform produced together, to share costs. Toyota seems to be keen on investing in smaller, domestic automakers, rather than forging cross-border tie-ups like some of its rivals.

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