The German car maker Volkswagen (VW) has announced it will acquire 19.9 per cent of JapanÔÇÖs Suzuki Motor Corp. by January 2010.
Under the terms of the deal, Suzuki will also acquire a stake in Europe's biggest carmaker, buying shares using the equivalent of up to half of what VW will spend on its own share buy.
The 19.9 per cent stake is estimated to be worth around Y222.5 billion (Ôé¼1.7 billion).
The partnership will create an extensive sales network across Asia, as VW already has a strong presence in China, and Suzuki is a big player in India.
It will also allow the two companies to complement each other in such areas as production and the development of fuel-efficient, low-emission vehicle technologies.
The deal will also give Suzuki access to investment funds.
Suzuki is the world's third biggest motorcycle maker by volume. Until two years ago it had been the market leader in the mini car market in Japan for more than 30 years.
In India, the worldÔÇÖs second most populous country, SuzukiÔÇÖs subsidiary, Maruti Suzuki India Ltd, holds around 50 per cent market share. Around 75 per cent of the cars sold in the country are small hatchbacks.
Passenger car sales in India rose 61 per cent last monthÔÇöthe biggest gain in five years.
VW is faring well in the recession, thanks to its success in countries such as Brazil. It also has a strong presence in China, where it is the second-biggest overseas automaker. The Asian country is set to become the worldÔÇÖs largest auto market this year, overtaking the US.
VW has also just bought 49.9 per cent of the German luxury sports car maker Porsche and will acquire all of the company by 2011, making Porsche the 10th brand in its portfolio.
It is believed that VW will eventually control 12 brands in total.
VWÔÇÖs global expansion strategy includes overtaking Toyota to become the worldÔÇÖs largest automaker by 2018.
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