TOKYO -- Toyota and Mazda plan to build a $1.6 billion U.S. assembly plant and jointly develop electric vehicle technologies.
The plant, which is set to start operating in 2021, will be capable of producing 300,000 vehicles a year, with production divided between the two automakers, the companies said in regulatory filings.
The plan on electric vehicles comes as tightening global emissions regulations prompt more automakers to develop battery powered cars.
Toyota and Mazda will also work together to develop in-car information technologies and automated driving functions.
Toyota will take a 5 percent stake in its smaller rival as part of the new joint venture, while Mazda will take a 0.25 percent stake in Toyota.
The automakers plan to produce Toyota Corolla sedans and a new Mazda SUV crossover at the U.S. plant.
Mazda, whose annual global vehicle sales are one-eighth that of Toyota, caters to a specific audience, largely in North America, with its design-conscious sedans and SUVs.
With a limited r&d budget of around 140 billion yen this year - a fraction of around 1 trillion yen at Toyota - Mazda has said that it lacks the funds to develop electric cars on its own.
Mazda stands to gain from a deal that gives the small automaker a production foothold in the United States. At the moment, Mazda ships all vehicles sold in the country, its biggest market, from its plants in Japan and Mexico.
Toyota initially had been planning to produce Corollas at its new $1 billion plant currently under construction in Mexico, but this will shift to the United States, and the automaker will instead produce its Tacoma truck model in Mexico.
Toyota has set a goal for all of its vehicles to be zero emission by 2050. Last year it established a division to develop full-sized EVs, shifting gears after long favoring EVs only for short-distance commuting given their limited driving range and lengthy charging time.
The plant is something of a surprise at a time of overcapacity in the U.S. market. It will be a boost to U.S. President Donald Trump, who campaigned on promises to increase manufacturing and expand employment for American autoworkers.
Global automakers are facing massive costs to quickly develop new technologies in lower-emission cars and self-driving cars.
Toyota has been courting a number of Japanese automakers in the past few years, announcing in February that it and Suzuki planned to cooperate in r&d projects while Toyota would tap its smaller rival's expertise in emerging Asian markets.
Toyota has a long-standing partnership with Subaru, under which the two automakers jointly developed a compact sports car model that is manufactured by Subaru.