Volkswagen has bought a 19.9% stake in Suzuki.
VW says the deal is to help both companies develop smaller, more environmentally friendly cars. However, Suzuki has factories in India and China - both huge markets that VW would be keen to exploit.
'The companies plan a joint approach to the growing worldwide demand for more environmentally friendly vehicles,' said VW in a statement.
'As demand continues to rise for smaller cars and for powertrains with higher fuel efficiency and lower CO2 output, Volkswagen and Suzuki will offer a compelling solution for customers in emerging markets buying a car for the first time, and also for customers in advanced economies seeking to lower their CO2 footprint while still enjoying the freedom of transport offered by an exciting range of cars.'
The deal is expected to be concluded next month.