VW agrees to buy 19.9% of Suzuki to boost India sales

Suzuki, Japan's fourth biggest automaker, will spend as much as half of the amount it will receive from Volkswagen into VW shares, Wolfsburg, Germany-based Volkswagen said in a statement Wednesday. The deal is subject to regulatory approval and will probably be completed by January, the companies said.

The carmakers will focus on “achieving synergies” in developing and manufacturing energy-efficient small cars in emerging markets. Suzuki controls Maruti Suzuki India Ltd., the maker of half of the cars sold in India. VW is the second- biggest overseas automaker in China, which is set to surpass the U.S. as the world's largest auto market this year.

“This is clearly the next step in going head to head with Toyota,” said Christoph Stuermer, a Frankfurt-based automotive analyst with IHS Global Insight. The cross shareholding is a “very wise choice” because it allows Suzuki to “keep its face” while opening the door to Volkswagen, he said.

Volkswagen rose 1.68 euros, or 2.1 percent, to 80.57 euros at 9:23 a.m. in Frankfurt, valuing the automaker at 30.4 billion euros (US$44.8 billion). Suzuki added 3.5 percent to close at 2,370 yen in Tokyo before the announcement. Maruti Suzuki, the carmaker 54.2 percent owned by Suzuki Motor, rose as much as 4.3 percent in Mumbai.

Volkswagen and Suzuki have been discussing a partnership since June, a person familiar with the matter has said. An investment by Volkswagen would pose a “serious threat” to the global dominance of Toyota Motor Corp., said Koji Endo, managing director of Advanced Research Japan in Tokyo.

“Volkswagen is like a department store carrying everything from luxury brands to truck-makers,” Endo said. “What they're missing is any presence in India and Southeast Asia. The point of partnering with Suzuki is to grab India.”

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