Toyota Motor Corp is teaming up with BMW AG in green car technology in a deal also aimed at shoring up the Japanese firm's European diesel car line-up just two years after a strategic shift away from diesel. The German premium car maker will supply diesel engines to Toyota from 2014 in Europe and the pair will collaborate on lithium-ion battery research for electric cars.
Toyota executives said the discussions with BMW started in April as its European business sought to cover a weak flank in its diesel car line-up. Toyota's decision to source diesel engines from BMW represents a reversal in strategy after it scrapped plans two years ago to develop 1.6-litre diesel engines with Japanese truck maker Isuzu Motors Ltd, in which it owns a 5.9 percent stake. Two and a half years ago, President Akio Toyoda told his first news conference that Toyota would shift its focus in Europe to hybrids and away from diesel so as not to get "lost in the crowd."
But Toyota has lost market share in Europe, where diesel driven cars make up about 55 percent of sales. Diesel engines use less fuel and emit less carbon dioxide than gasoline engines.
In the first 10 months of this year, Toyota's sales in Europe fell 9.5 percent to about 430,000 vehicles, although that was partly due to supply constraints after the tsunami in Japan in March. After peaking in 2007, Toyota's sales have fallen in Europe, also hit last year by a major recall crisis. Toyota has diesel engines of its own, including 1.4 litre, 2.0 litre and 2.2 litre engines produced in Europe. But Toyota said it would start using BMW's 2.0 litre engine on one model first, in 2014, and expand the line-up thereafter.