Bloomberg News

BMW to Supply Toyota With Diesel Engines in Partnership Deal

December 01, 2011

(Updates with BMW share price in sixth paragraph.)

Dec. 1 (Bloomberg) -- Bayerische Motoren Werke AG, the world’s largest maker of luxury vehicles, will supply Toyota Motor Corp. with diesel engines as part of a cooperation agreement that will initially focus on developing car batteries.

The manufacturers will collaborate on research into next- generation lithium-ion batteries and explore other projects to develop fuel-saving technologies, the automakers said today in Tokyo. As part of the cooperation, BMW will supply Toyota with 1.6-liter and 2-liter engines for the Japanese company’s models in Europe starting in 2014.

The agreement allows Toyota, Asia’s largest carmaker, to expand its European lineup of diesel-powered vehicles. For BMW, the partnership paves the way for the company to team up with the biggest producer of hybrid vehicles, as it seeks to fend off Volkswagen AG’s Audi, which aims to take the luxury-car lead.

“It’s positive for BMW to expand its range of partners among mass-market carmakers,” said Daniel Schwarz, an analyst with Commerzbank in Frankfurt. “One of the problems for premium manufacturers is generating scale for environmental technology, and this will help.”

BMW already cooperates with PSA Peugeot Citroen, Europe’s second-largest carmaker, on hybrid technology and engines for the Mini brand. The company is developing a line of electric- powered cars under its new “i” sub-brand. The first vehicle, the i3 city car, is due to be introduced in 2013, followed by the i8 plug-in hybrid supercar in 2014.

Shares Gain

Toyota, which counted on Europe for 12 percent of sales in the last fiscal year, rose 2.3 percent to 2,567 yen at the 3 p.m. close of Tokyo trading. The benchmark Nikkei 225 Stock Average climbed 1.9 percent. BMW was up 0.2 percent to 56.10 euros as of 10:53 a.m. in Frankfurt trading.

“Both companies will bring their wide-ranging knowledge -- starting with that concerning environmental technologies -- to the table,” Toyota President Akio Toyoda said in a statement. “It is a great joy and a thrill to enter into this mid-to-long- term collaborative relationship with BMW.”

Mathias Schmidt, a BMW spokesman in Munich, declined to comment on the number of engines that will be delivered under the agreement with Toyota’s European operations.

In August, the Japanese carmaker and Ford Motor Co. announced a plan to jointly develop a hybrid system for pickup trucks and sport-utility vehicles as U.S. fuel-economy rules tighten. Toyota is also working with U.S. electric-car maker Tesla Motors Inc. on a battery-powered version of the Toyota RAV4 sport-utility vehicle that will go on sale in 2012.

BMW has been looking to sell components to other manufacturers to boost revenue. The company has agreed to supply engines to Sweden’s Saab Automobile and Carbon Motors Corp., which is developing a police car for U.S. law enforcement agencies. It also supplies engines to boutique carmaker Wiessmann GmbH.

--With assistance from Yuki Hagiwara in Tokyo and Chris Reiter in Berlin. Editors: Young-Sam Cho, Chad Thomas

To contact the reporters on this story: Anna Mukai in Tokyo at amukai1@bloomberg.net; Masatsugu Horie in Osaka at mhorie3@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net


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