Dive Brief:
- Toyota and its subsidiaries Toyota Industries and Aisin plan to sell a roughly 10% combined stake in automotive supplier Denso worth around $4.7 billion (700 billion yen) by the end of the year, Reuters reported Tuesday, citing sources familiar with the deal.
- Toyota’s portion of the sale is around 5% of the 10% stake in Denso, with Toyota Industries and Aisin making up the remainder, according to Reuters.
- Denso is a key Toyota supplier and the world's second-largest producer of automotive components, with consolidated net sales of approximately $47.9 billion in the fiscal year ending March 31, 2023.
Dive Insight:
Toyota held about 24% of Denso's total shares as of the end of September, according to Nikkei Asia, while Toyota Industries owned a 9% stake and Aisin 2%. Toyota, however, is expected to remain Denso’s largest shareholder after the sale is complete, according to Reuters.
The sale would reduce Toyota’s holding in Denso to around 20% and lower its holdings to about 20%, with Toyota Industries’ stake dropping to around 5%. Aisin, however, is considering selling all of its stake in Denso, according to Nikkei Asia.
Denso plans to buy back its own shares in the open market to offset the potential drop of its share price as a result of Toyota’s stock sale, according to Reuters’ sources. In a statement to Reuters, Denso said it was considering a share sale, a buyback and other capital measures, but nothing has been decided yet.
A Toyota spokesperson said in an email to Automotive Dive that the company is not in a position to comment on the deal.
As global automakers focus on the electrification of their lineups, many of the traditional manufacturer supplier relationships are expected to evolve as vehicle mechanical systems are replaced with electronic systems.
To keep up with the trend, Denso aims to grow sales of its electrification business to $8.1 billion by 2025. This includes improvements in product quality, expanding its product line to include EV components and manufacturing improvements, which include cutting development times by half to get products to customers faster, according to a press release.
The reported plans to reduce its stake in Denso is Toyota’s second major financial divestment this year. In July, the automaker said it was selling a $1.8 billion stake in telecoms company KDDI Corp to raise funds to accelerate vehicle electrification. In the company’s regulatory filing, Toyota said the sale would help the automaker reduce its strategic shareholdings, better use its assets and improve capital efficiency.
As of March, Toyota shifted more than half of its R&D staff and budgets to accelerate its work on electrification, including battery technology and software-based vehicles. In June, Toyota said it would streamline its EV manufacturing processes with new, modular designs, gigacasting and self-propelling production technology to lower the costs of EV production and make its factories more efficient.
These moves could help the automaker reach its goal of tripling electric vehicle production in 2025 to 600,000 vehicles. Toyota is also aiming for a production target of 190,000 battery-powered vehicles in 2024.
