TOKYO (Reuters) – Toyota Motor Corp (7203.T) and Mazda Motor Corp (7261.T) plan to build a $1.6 billion U.S. assembly plant, the two said on Friday, as part of an alliance that will also see the Japanese automakers jointly develop electric vehicle technologies.

The two will take small stakes in each other as part of the tie-up: Toyota, the world’s second-largest automaker by vehicle sales last year, will take a 5 percent share of Mazda, extending its dominance in Japan’s auto sector. Mazda will take a 0.25 percent share of its larger rival.

The plant, something of a surprise at a time of overcapacity in the U.S. market, will be a boost to U.S. President Donald Trump, who campaigned on promises to increase manufacturing and expand employment for American autoworkers.

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.

The electric vehicles cooperation, meanwhile, comes as the tightening of global emissions regulations prompts more automakers to develop battery powered cars, as the industry struggles with hefty research costs and intense competition from technology companies over technology like self-driving cars.

As part of the agreement, Toyota and Mazda will also work together to develop in-car information technologies and automated driving functions.

Toyota, Japan’s biggest auto company, has been forging alliances with smaller Japanese rivals for several years, effectively engineering a loose consolidation of the Japanese auto sector. It already owns a 16.5 percent stake in Subaru Corp (7270.T), Japan’s No. 6 automaker, with which it also has a development partnership.

Toyota is also courting compact car maker Suzuki Motor Corp (7269.T) to cooperate on R&D and parts supply as Toyota seeks to tap its smaller rival’s expertise in emerging Asian markets.

A stake in Mazda may also prevent future incursions by tech companies, one analyst said.

“For a technology company which lacks the expertise in making cars, Mazda could look like a very interesting acquisition. They’re very good, they’re not too expensive. Maybe Toyota realizes this,” CLSA managing director Chris Richter said.