The companies, which will spend a total of some 200 billion yen ($1.81 billion), will bring together their respective technologies for a project to build a smart city to start in 2021 on a former Toyota plant site in Shizuoka Prefecture.
Toyota aims to speed up its next-generation technology by tapping NTT's communications know-how.
The companies were set to announce the deal Tuesday afternoon.
Toyota aims to speed up development of next-generation vehicles using the 5G, or next generation telecommunication standard.
Competition among automakers is heating up in the development of technologies in areas of connected cars, automated driving, sharing and electrification -- sometimes referred to by the acronym CASE. In particular, development of connected cars requires use of telecommunication technology to collect information from outside the vehicle, not just improved vehicle performance.
Toyota and NTT in 2017 announced a joint research and development project for connected cars, and launched tests in December 2018. In this new project, the companies aim to establish a basic technology to compile a huge amount of pseudo data collected from connected cars, including vehicle travel data and video taken of the environment surrounding moving vehicles, which will be analyzed at a central location.
A major focus of the latest deal, in addition of the development of next-generation cars, is believed to be the project to build a "Woven City," a testing ground the automaker will start building in 2021 in the Shizuoka Prefecture city of Susono at a location to be vacated by subsidiary Toyota Motor East Japan's Higashi Fuji Plant to close in late 2020.
Positioned as a "connected city," the Woven City is envisioned as a futuristic town loaded with new technologies, including self-driving cars such as e-Palette, an electric vehicle Toyota is developing for commercial use. Residents of the smart city will play the role of verifying various new technologies, including not only vehicles but indoor-use robots. The smart city will also be used to develop mobility as a service, or MaaS, and artificial intelligence technologies. As all these technologies heavily rely on high-speed network connection technology that Toyota aims to take advantage of the tie-up with NTT.
NTT, for its part, is making a "smart city" initiative aimed at improving quality of life in urban areas using data, as a pillar of its growth strategy. In the United States, the telecoms giant has teamed up with the city of Las Vegas to develop a system that monitors or detects moving vehicles and pedestrians through the combined use of surveillance cameras and acoustic sensors, which has successfully contributed to reducing traffic accidents.
In Japan, NTT is working with the cities of Sapporo and Chiba. In Sapporo, a project is underway to support tourism using data on consumer purchase history and locations, while in Chiba, it is working on a project to test self-driving technology.
NTT, which has little hope for growth in its communications business, is focusing on smart cities because it sees great potential for the area to grow into a key revenue source. In smart cities, NTT expects to take advantage of technologies held by NTT group companies, including 5G technology, to have various sensors to work together, which it sees leading to increased revenues.
Toyota in 2018 announced a large-scale business tie-up with SoftBank Group, which has included the establishment of a mobility-service joint venture. Toyota also has an agreement with KDDI for a communication technology for use in its existing car models. The latest capital deal with NTT means Toyota has tie-ups with all major telecommunication companies in Japan.