Toyota and Suzuki soared in Tokyo trading Wednesday after reports that the Japanese automakers are in talks over a partnership focused on making compact cars for emerging markets, including India.

The leading Nikkei business daily said Toyota, the world's biggest automaker, and small-car specialist Suzuki were discussing the possible tie-up. Kyodo News ran a similar story, citing sources familiar with the matter.

Both firms quickly denied they were discussing a partnership, but investors embraced the news, sending Suzuki soaring almost 16 percent in early deals.
he shares finished the morning at 3,565 yen, up 10.57 percent.

Toyota rose 3.68 percent to 6,873 yen by the break, after adding more than four percent at one stage.

The Nikkei report said the two firms were also discussing investing in each others' shares while Toyota was set to make its mini-car unit Daihatsu a wholly owned company. It currently owns slightly more than half of Daihatsu.

The reported Toyota-Suzuki talks were aimed at swapping environmentally friendly technologies and other know-how to capitalise on demand for small cars in India, Thailand, Indonesia and other emerging markets.

Both firms issued brief Japanese-language statements that described the reports as "not a fact".

With respect to Daihatsu, Toyota said: "We are constantly considering a number of possibilities relating to Daihatsu, such as partnerships or business restructuring, including making the company a fully owned subsidiary. However, at this point, no decisions have been made."

Suzuki, a minicar specialist that sells about 2.8 million vehicles a year globally compared with about 10 million for Toyota, drives Japan's minicar market alongside rival Daihatsu.

Suzuki also has a 40 percent share of the Indian passenger-vehicle sector, while Toyota, which set up its Indian unit in 1997, has been struggling to expand sales there with its market share standing at just five percent, according to the Nikkei.

Suzuki would likely take advantage of Toyota's next-generation technology including self-driving cars, it said.

Suzuki formed a capital alliance with Volkswagen in 2009 after ending a partnership with US giant General Motors.

But differences of opinion over management control and other issues ultimately led to an end to the tie-up with the German auto titan last year.