Toyota and Isuzu dissolve partnership

Changing market forces push the companies away from diesel tech.

Toyota and Isuzu have decided to call their partnership quits. Toyota owns a 5.89 percent stake in Isuzu, which the latter will buy back for 80 billion yen ($720 million).

Back in 2006, Toyota and Isuzu formed a partnership with capital tie-up in order to produce a 1.6-liter diesel engine, to be produced at a new factory in Hokkaido in northern Japan. The two companies have cited changing market forces as basis for the dissolution of the alliance.

Shortly after the agreement, both companies were affected by the global financial crisis. In recent years, diesel has also fallen out of favor as a result of Volkswagen's emissions scandal. Large markets such as China and Europe have tightened emissions regulations, while a global push towards electrification has made the diesel project untenable. Toyota announced last October that its current generation of diesels will be its last.

Toyota still owns Hino, maker of heavy-duty commercial vehicles, which largely overlaps with Isuzu's product line. Mitsubishi Corporation and Itochu Corporation continue to be large stakeholders in Isuzu.

The automakers issued a joint statement saying, "As the automotive industry faces sweeping, once-in-a-century changes, Isuzu and Toyota intend to accelerate their efforts to improve competitiveness in the commercial and passenger vehicle markets, respectively."