Car News in India

Volkswagen AG has agreed to pay 222.5 billion yen ($2.5 billion) for a 19.9 per cent stake in Suzuki Motor Corporation.

Volkswagen and Suzuki plan to develop hybrids and electric cars under both car brands, Suzuki Chief Executive Officer, Osamu Suzuki said. Suzuki will buy as much as 50 billion yen in Wolfsburg, Germany-based VW's ordinary shares, he said. VW will become the top shareholder in Hamamatsu, Japan-based Suzuki.

Suzuki controls Maruti Suzuki the maker of half of all cars sold in India, while Volkswagen is the second-biggest overseas automaker in China, which is set to surpass the U.S. as the world's largest car market this year. Combined annual worldwide sales of the two manufacturers will exceed 8 million cars.

“The automobile industry is going through a fundamental shift,” said VW Chief Executive Martin Winterkorn. “Alliances are at the top of the agenda and they are indispensable for competition. The global crisis has speeded up this reorganization.”

Volkswagen and Suzuki have been discussing a partnership since June. Serious talks began in September, and Winterkorn visited Suzuki's headquarters and factories last month, said Osamu Suzuki. The transaction is subject to regulatory approval and will probably be completed by January, the companies said.

The partnership will help Volkswagen emerge as the world's largest car maker.