UPDATE 3-Toyota to supply hybrid technology to Mazda

* Toyota to supply hybrid tech under licence to Mazda

* Mazda aims to sell hybrid model in Japan by 2013

* Mazda to buy battery, other parts from Toyota suppliers

* Deal highlights distancing of Mazda from Ford
(Adds details)

By Chang-Ran Kim, Asia autos correspondent

TOKYO, March 29 (BestGrowthStock) – Toyota Motor (7203.T: ) and Mazda
Motor (7261.T: ) announced a deal under which Japan’s top automaker
will supply its hybrid technology under licence to Mazda, in the
latest link-up within the fast-changing auto industry.

Japan’s No.1 and No.5 carmakers have been discussing the
possibility behind the scenes since last spring as the popularity
of gasoline-electric cars surged in Japan with the help of
generous government subsidies.

Hybrid cars, which improve fuel efficiency by twinning
internal combustion engines with electric motors, are seen as
crucial for automakers to boost sales in the coming years as
governments introduce stricter environmental regulations.

Gasoline-electric cars have enjoyed a burst of demand
especially in Japan over the past year as the government
introduced an exemption from certain taxes for gasoline-electric
and other next-generation vehicles for a three-year period.

“Hybrids are spreading fast in Japan, and launching a model
in the domestic market has become an urgent task,” Mazda
Executive Vice President Masaharu Yamaki told a joint news
conference in Tokyo.

“That is one of the reasons why we decided to seek this
agreement with Toyota,” he said.

Mazda said it aimed to begin selling a vehicle that combines
Toyota’s hybrid system with its own next-generation gasoline
engine in Japan by 2013. Key components such as battery packs,
controls units, inverters and regenerative braking units will be
procured from Toyota suppliers.

The agreement underscores a growing need for smaller
carmakers to find partners to fill the technology gap without
draining their limited resources. Among others, archrivals
Daimler AG (DAIGn.DE: ) and BMW AG (BMWG.DE: ) are also working
together on hybrid development.

DISTANCING FORD

A Toyota-Mazda pairing also highlights a distancing of Mazda
from top shareholder Ford Motor Co (F.N: ), which is among the few
automakers today with a proprietary hybrid system after it
initially licensed technology from Toyota.

Ford and Mazda continue to share some vehicle platforms and
operate joint factories, but insiders say relations have cooled
to match the U.S. automaker’s diminished stake in the
Hiroshima-based automaker, from a controlling 33.4 percent.

In late 2008, Ford sold all but 13 percent of its Mazda
stake, which was further diluted to 11 percent when the latter
issued $1 billion in new shares to raise money to invest in
hybrid and other technologies.

“Our relationship with Ford remains solid,” Yamaki said,
adding that Mazda had judged that procuring hybrid parts from
Toyota’s suppliers in Japan was more efficient than working with
Ford.

Toyota, a pioneer in hybrid technology with at least a
12-year lead on most rivals, currently supplies its hybrid system
to Nissan Motor Co (7201.T: ), which uses it in its Altima sedan
for the U.S. market to clear regulations there. Nissan plans to
switch to its own hybrid system with a new model later this year.

Toyota Executive Vice President Takeshi Uchiyamada said the
deal with Mazda could indirectly help to lower procurement costs
as more hybrid vehicles enter the market.

The deal will likely be a boon for Toyota’s key hybrid
suppliers such as affiliates Denso Corp (6902.T: ) and Aisin Seiki
Co (7259.T: ), as well as Panasonic Corp (6752.T: ), which operates a
battery joint venture with Toyota.

Mazda, the maker of the Mazda6/Atenza and other sporty cars,
has a goal of raising its fleet’s fuel economy by 30 percent
mainly by improving its internal combustion engines by 2015
compared with 2008 levels. It has said it would gradually add
electric components such as hybrid systems mainly beyond 2015.

Yamaki declined to disclose Mazda’s plans for hybrid launches
outside Japan.

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(Editing by Chris Gallagher and Michael Watson)

UPDATE 3-Toyota to supply hybrid technology to Mazda