The German auto giant Volkswagen announced that it would buy 19.9 per cent stake in Japanese car maker Suzuki Motor for $2.5 billion.

On the other hand, Suzuki will purchase shares in Volkswagen worth up to half the amount the German automaker buys.

The two car makers announced in a joint statement that they reached a common understanding to establish the partnership.

Suzuki owns 54 per cent stake in India’s biggest car maker Maruti Suzuki Ltd.

The partnership is expected to boost sales of the two companies as Suzuki has strong presence in India and Volkswagen is big player in China.

Speaking on the partnership, the two companies said, “In terms of global presence and product diversity, the partnership marks an important step towards the future for both the companies.”

The deal is expected to be completed in early next year.