Volkswagen Agrees to Buy 19.9 Stake in Suzuki as it Eyes Small car and Indian Markets

Confirming rumors that have been circulating for the past few months, Volkswagen and Suzuki announced on Wednesday that they have reached a common understanding to establish a close long-term strategic partnership.

Under the agreement, VW will buy a 19.9 per cent stake in Suzuki Motor Corp for 225 billion Yen (approx US$2.5 billion) while the Japanese automaker will invest up to one half of the amount received from the German automaker into shares of Volkswagen.

The move comes only a few days after the Volkswagen Group announced that it acquired a 49.9% stake in Porsche AG's car operations for €3.9 billion.

Volkswagen plans to make the best of Suzuki's expertise in small, fuel-efficient cars as well the Japanese firm's presence in India where it controls Maruti Suzuki India Ltd, the maker of half of all cars sold in the country.

At a joint press conference in Tokyo, Suzuki Chief Executive Officer Osamu Suzuki said that the two companies also plan to develop hybrid and electric vehicles under both brands.

"As demand continues to rise for smaller cars and for powertrains with higher fuel efficiency and lower CO₂ output, Volkswagen and Suzuki will offer a compelling solution for customers in emerging markets buying a car for the first time and also for customers in advanced economies seeking to lower their CO₂ footprint while still enjoying the freedom of transport offered by an exciting range of cars," VW said in a prepared statement to the press.