As part the deal, Volkswagen will be buying 19.9 per cent of Suzuki's issued shares, while Suzuki will invest half of the amount received from Volkswagen into shares of the German car maker.
With the 222.5 billion yen deal with the Japanese automaker, Volkswagen aims at beating down Toyota, the world's leading car maker.
The deal will also boost VW's presence in India where Suzuki dominates through its Maruti Suzuki unit.
On Wednesday, Dec 9, representatives of both companies signed a framework agreement. The deal is expected to be completed in 2010 on receiving approval of the relevant authorities.