Earlier this month, the internationally known Toyota (NYSE:TM) announced its plan to take a 5% stake in its fellow automaker Mazda (TYO: 7261), as well as build a joint automobile factory in the United States. The 5% stake will equate to approximately $455 million by both Toyota, and Mazda, which plans to purchase the same percentage of shares in the former. The Japanese automobile giants plan to build a plethora of cars, with crossover models and the Corolla model built by Mazda and Toyota, respectively. The manufacturing plant alone will reportedly be worth $1.6 billion, and create up to 4,000 jobs. Such a collaboration between two automobile manufacturers is indicative of the changing industry, for both the traditional automotive industry and the rising self-driving car sector.
A high-tech approach that may become its own industry in the near future, self-driving car studies have already been conducted by technology companies such as Google (NASDAQ: GOOGL). In addition to autonomous cars, other growing technology companies such as Apple (NASDAQ: AAPL) and Amazon (NASDAQ: AMZN) pose a threat to the traditional automotive sector due to their involvement in novel technological creations. Even the American automaker company Tesla (NASDAQ: TSLA) may pose a threat, given its fully-electric cars amidst lower emission vehicles by Toyota. Toyota president Akio Toyoda expanded on the growing competition, stating that "New players from totally new business are challenging us. That's why [he] feel[s] it has become increasingly important for us automakers to gather new partners without seeing things in confrontational perspectives."
While new competitors from across industries are the reason for the new Toyota-Mazda partnership, car regulations and political factors appear to play a role as well. Firstly, U.S fuel-efficiency standards are rising: it requires that the automotive industry provides an average of 54.5 miles per gallon by 2025.
Among America's desire to be more eco-friendly through its changing fuel-efficiency standard, President Trump's dedication to rebuild America's auto manufacturing industry may have influenced the Toyota-Mazda joint effort. Recently, Trump has begun to change regulations for auto companies under the North American Free Trade Agreement, or NAFTA. The changes will serve to benefit North American automobile companies and manufacturers, ensuring that these companies become a priority over auto suppliers from Asia and Europe. Trump's focus on American automobile companies, however, can be seen like no other through his response to Toyota's partnership with Mazda. In a tweet following the announced joint strategy, the President responded, "Toyota & Mazda to build a new $1.6B plant here in the U.S.A. and create 4K new American jobs. A great investment in American manufacturing!"
While the new factory's location has not been announced yet, both automobile giants desire to see it produce cars by 2021. The result itself may have a bit more modifications for both companies, seeing that Mr. Toyota has often spoke about making Toyota products have a bit more style, style that Mazda's sporty cars have. In turn, Mazda may gain impressive electric-powered emission modifications to enhance its current line-up of cars mostly supported by internal combustion engines.