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723 views Nov 29, 2011

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If politics makes for strange bedfellows, so do fluctuations in international currency. Toyota is a world leader in hybrid vehicles, but the strength of the Japanese yen against the euro means that Toyota either accepts a reduced profit on hybrids sold in Europe or raises hybrid pricing to unpalatable levels.

Toyota can justify making less on its hybrids if it can boost profitability of conventional vehicles, which is why its in dialogue with BMW to buy the German automaker’s diesel engines for vehicles sold in Europe. While no deal has been announced, Reuters reports that BMW and Toyota are in talks to share green technology in the European market.

Toyota would benefit from using BMW’s diesel engines, which would reduce Toyota’s research and development costs, give them a selling point in the European market and cut manufacturing costs by reducing the number of diesel engines imported from Japan.

BMW would benefit from Toyota’s well-sorted hybrid vehicle technology, which it would (potentially) use to expand its hybrid vehicle product offerings. BMW has also partnered with PSA Peugeot Citroen Group to develop hybrid vehicles, but this partnership covers hybrid subcompacts only.

Toyota has a development partner for hybrids, too: the Japanese automaker is working with Ford, but their agreement specifically covers the development of hybrid trucks and SUVs only.

This isn’t the first time that BMW has agreed to supply its diesel engines to other automakers. Carbon Motors, the start up police-car-only manufacturer based in Connersville, Indiana, signed a deal to use BMW’s 3.0-liter twin-turbo diesel engines exclusively back in March of 2010.