TOKYO (Reuters) – Daimler Truck Holding AG and Toyota Motor Corp have struck a preliminary deal to combine their truck units in Japan, the companies said on Tuesday.

Under the memorandum of understanding (MOU), the businesses of Daimler-owned Mitsubishi Fuso Truck and Bus Corp and Toyota subsidiary Hino Motors Ltd would be combined under a holding company, they said in a statement.

The shares of the new company are expected to be listed on the Tokyo Stock Exchange’s prime market.

The companies see the tie-up as an opportunity to achieve the scale they need to make technological advances, Daimler Truck CEO Martin Daum told a press conference in Tokyo.

“We are accelerating towards zero emissions, but there is one major challenge and this is the required funding,” Daum said. “There is only one way to make this parallel tech development work: economies of scale.”

The sales organisation globally will remain separate, but the two companies will pursue joint development, procurement and production, he said.

Daimler Truck and Toyota will invest in the company equally and cooperate on the development of hydrogen and other technologies in areas such as connectivity and autonomous driving, their statement said.

Hydrogen would be the “future” of automotive mobility, as it was the solution to carbon neutrality, Daum added.

The companies expect to sign a definitive agreement in the first quarter of 2024 and close the transaction by the end of next year, they said.

Last year a committee tasked with investigating an emissions scandal at Hino, which became a Toyota subsidiary in 2001, found that the truck and bus maker had falsified engine emissions data going back to 2003.

Four Hino executives, including those overseeing production and compliance, stepped down over the scandal last October. President Satoshi Ogiso, who remains in his post, returned half his monthly compensation for six months.

(Reporting by Daniel Leussink and Satoshi Sugiyama in Tokyo, Friederike Heine in Berlin; Editing by Chang-Ran Kim and Jan Harvey)

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