Japanese auto giants Toyota Motor Corporation and Mazda Motor Corporation on Friday revealed a plan to set up a joint-venture auto manufacturing facility in the United States.

The $1.6 billion auto manufacturing facility is part of an alliance that will also see Toyota and Mazda jointly develop electric cars.

The plant will be capable of producing 300,000 vehicles a year, with production divided between the two automakers, and employ about 4,000 people. It will start operating in 2021.

Janet Lewis, chief of Asia transportation research at Macquarie Securities, said, “Mazda needs electrification technology. In the past they've pooh-poohed EVs, they've felt that they can make internal combustion engines more efficient, but the bottom line is that globally you need to have this technology.”

Mazda will also gain from the deal by getting a foothold in the United States. Currently, it ships all vehicles sold in Japan, its largest market, from its plants in the domestic country and Mexico.

As part of the tie-up, Toyota and Mazda will take small stakes in each other. Toyota will take a 5 per cent share of Mazda, which will extend its dominance in the domestic market. Mazda will take a 0.25 per cent share of its bigger competitor.