The Tokyo-based venture, which will bring together some 1,000 employees including new hires, will be 90 percent held by Toyota with group suppliers Denso Corp and Aisin Seiki each taking five percent.

“This company’s mission is to accelerate software development in a more effective and disruptive way, by augmenting the Toyota Group’s capability through the hiring of world-class software engineers”, James Kuffner, who will lead the venture, said in a statement.

Dubbed the Toyota Research Institute-Advanced Development, the venture will take on Alphabet's Waymo and Tesla which are giving traditional automakers a run for their money in building self-driving and electric cars.

Toyota is also investing $1 billion in artificial intelligence and other technologies through its US-based Toyota Research Institute, and has struck up technology partnerships with Microsoft Corp and Uber Technologies.

Last month, Toyota Research Institute’s venture capital unit said it was co-leading an $11.5-million seed investment in May Mobility, an Ann Arbor-based startup that is developing self-driving shuttles for college campuses, central business districts and similar low-speed applications.