In a deal which will cost Europe's top ranked and largest automobiles manufacturer a whooping 222.5 Billion Yen ($2.5 Billion), Volkswagen has agreed to purchase a 19.9% stake in Suzuki Motor Corp. to boost its presence in the Indian auto market.

On its part, Suzuki will spend almost 50% of the amount it receives from Volkswagen to buy the company's shares. The deal has been confirmed by both the parties involved and is now subject to all regulatory approval and is most likely to be completed by January.

"This is clearly the next step in going head to head with Toyota. The cross shareholding is a very wise choice because it allows Suzuki to keep its face while opening the door to Volkswagen", said Christoph Stuermer, a Frankfurt-based automotive analyst with IHS Global Insight.

As shared by the auto makers, with the deal, they are looking to "achieving synergies" in developing and making "energy-efficient cars" in one of the world's fastest emerging and growing markets. Currently, Suzuki has a strong presence in India through Maruti Suzuki which manufactures about 50% of the total cars sold across the country.

If all approvals are gained, VW will buy the designated 19.9% stake in February.