Fuji Heavy and Toyota Partner on Hybrid SUV

Subaru maker Fuji Heavy Industries Ltd. and Toyota Motor Corp., its 16.5% owner, will develop a hybrid SUV for each brand by 2017, The Nikkei reports.

The joint project will combine Toyota's advanced hybrid technology and Subaru's horizontally opposed "boxer" engine to update a hybrid SUV that Fuji Heavy revealed in concept form four months ago.

FHI's realization that its hybrid system is less efficient than Toyota's led to the partnership, according to the Tokyo-based newspaper. It says the goal is to give each company a vehicle that will help it meet stricter U.S. fuel economy standards coming in 2016 and after.

The arrangement saves FHI development time and money, while strengthening Toyota's hybrid supplier business.

The hybrid vehicles for both companies will likely be manufactured at FHI's Yajima plant in Gunma Prefecture. The Nikkei cites unnamed sources who say the two automakers may eventually develop plug-in hybrids together.

The project marks the third between the companies since they formed a business partnership in 2005. In 2007, Subaru's plant in Indiana began building Toyota Camry sedans. In 2012, the companies collaborated on the Toyota 86 and Subaru BRZ sports cars.