Toyota's Strategic Divestment:
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Toyota Group {{ m-tag option="price" ticker="TM" currency="USD" }}, the world's top-selling automaker, is taking a significant step in its business strategy by planning to sell approximately 10% of its stake in auto supplier Denso {{ m-tag option="price" ticker="DNZOY" currency="USD" }}. This move, expected to be completed by year-end, is valued at around $4.7 billion. Toyota Motor, which held a 24.2% stake in Denso as of September, aims to remain the top shareholder post-sale. This decision aligns with Toyota's broader shift towards electric vehicle (EV) production, a sector demanding substantial research, development, and infrastructure investment.

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Musk's Dismissal of Hybrids:
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Simultaneously, Elon Musk, CEO of Tesla {{ m-tag option="price" ticker="TSLA" currency="USD" }}, has been vocal about his skepticism towards hybrid vehicles, labeling them as a mere "phase" in automotive evolution. Despite Musk's dismissal, Toyota has doubled its investment in hybrid technology, which is paying off. In 2023, hybrid vehicle sales surged by 48% in the first three quarters, outpacing the growth in the EV market, which has shown signs of cooling.

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Unwinding Cross-Shareholdings:
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Toyota's move to sell its Denso stake is a more significant trend among Japanese companies to unwind cross-shareholdings. This practice has been under scrutiny for its impact on capital utilization. This sale is expected to attract domestic investors, with the share price yet to be determined. Denso, a key player in the automotive component sector, plans to counterbalance the potential impact on its share price by buying back some of its shares in the open market.

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Toyota's EV Market Focus:
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The decision by Toyota to divest from Denso and focus more on hybrid and EV technologies reflects a strategic pivot in response to the evolving automotive market. This move is particularly significant given the backdrop of Toyota's recent decision to sell a stake in telecoms company KDDI, further underscoring its commitment to the EV sector.

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