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Volkswagen & Toyota Units to Co-Develop Autonomous Trucks

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Per Reuters, Volkswagen AG’s (VLKAY - Free Report) truck-and-bus unit, Volkswagen Truck & Bus GmbH agreed to form a strategic alliance with Hino Motors, Ltd., a subsidiary of Toyota Motor Corporation (TM - Free Report) , to develop self-driving capabilities and lower-emission vehicles.

Intended to strengthen their market position as commercial-vehicle manufacturers, the two automakers will join forces to deal with rising investment costs related to the development of autonomous vehicles and new transportation services including ride sharing.

The combined forces will work on research and development, technology and procurement of gasoline-electric and diesel hybrid engines as well as self-driving technologies. This will enable both the companies to benefit from economies of scale and come up with innovative products at a fast pace compared with the time required while working separately.

Volkswagen AG Price and Consensus

However, the partnership between the two subsidiary units won’t change the competition that Volkswagen and Toyota share in the passenger-car market.

Volkswagen Truck & Bus is the third-largest commercial vehicle manufacturer in the world, which reportedly sold roughly 205,000 units in 2017 and caters Europe and South America under the brand names MAN, Scania and Volkswagen Caminhoes e Onibus. Further, it has been expanding its presence in Asia.

Another commercial-vehicle manufacturer, Hino sold roughly 170,000 vehicles in 2017. Out of the total units, almost 70% were sold in Japan and the rest of Asia, where it dominates the commercial-vehicle market. Also, it has been developing operations in Africa and North America.

This is not the first collaboration that Volkswagen Truck & Bus is forming to develop new technologies for commercial vehicles. Earlier in September 2017, it partnered with Navistar International Corporation to launch an electric medium-duty truck in North America by late 2019.

Price Performance

Over a year, shares of Volkswagen have outperformed the industry it belongs to. During the period, its stock has gained 47.7% in comparison with the industry’s rise of 21.5%.

Zacks Rank & Key Picks

Volkswagen carries a Zacks Rank #4 (Sell). A few better-ranked stocks in the auto space are Fox Factory Holding Corp. (FOXF - Free Report) and BorgWarner Inc. (BWA - Free Report) , both carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Fox Factory has expected long-term growth rate of 10.5%. Over a year, shares of the company have gained 32.8%.

BorgWarner has expected long-term growth rate of 8.6%. Shares of the company rose 40.9% in the past year.

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