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Toyota to Form Joint Venture With Mazda for EV Technology

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Per a Wall Street Journal report, Toyota Motor Corporation (TM - Free Report) is going to start a new venture with Mazda Motor Corp for the development of electric vehicles (“EV”). This move is in sync with the new strategy adopted by carmakers to increase focus on electrified vehicles.

The venture, EV Common Architecture Spirit Co., is the latest alliance between Toyota and Mazda. While Toyota will hold 90% interest in the new venture, Mazda and Denso Corp, Toyota’s biggest supplier, will hold a 5% stake each. The new venture will develop technology for different types of electric vehicles, including passenger cars, mini-vehicles, SUVs and light trucks. Toyota will provide most of the financial requirements and EV knowhow. Mazda, on the other hand, will support with its advanced technologies such as compression ignition engine.

Push for EVs has intensified in recent times. China, the largest market for EVs, intends to convert to EVs over the next two to three decades. Also, EV pioneer Tesla, Inc. (TSLA - Free Report) is moving at a rapid speed and creating immense pressure on conventional vehicles makers to devise plans for converting to EVs.  
Over the past three months, shares of Toyota have slightly outperformed the industry it belongs to. Shares of the company have increased 12.8%, while the industry has gained 12.6%.

Toyota currently sports a Zacks Rank #1 (Strong Buy), while Tesla carries a Zacks Rank #3 (Hold).

Two stocks worth considering in the auto space are Allison Holdings, Inc. (ALSN - Free Report) and Volkswagen AG (VLKAY - Free Report) . While Allison Holdings sports a Zacks Rank #1, Volkswagen carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Allison Holdings has an expected long-term earnings growth rate of 10%.

Volkswagen has an expected long-term earnings growth rate of 8.9%.

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