Toyota Motor Corp. is mulling a buyout at Daihatsu Motor Co., a transaction valued at $3.2 billion at current market prices. Toyota holds a 51.2-percent stake at Daihatsu, which specializes in building 660cc mini-vehicles and compact cars.
If Toyota decides to gain full control, it could leverage the brand better and cut even lower procurement costs for Daihatsu. In a statement, Toyota said it has been considering a number of possibilities with regards to Daihatsu, including partnerships and business restructuring, as well as making the mini-vehicle maker a fully owned subsidiary.
Toyota said it has yet to make decision regarding Daihatsu. CLSA senior research analyst Christopher Richter has remarked that he expects Toyota to use the Daihatsu brand as a low-cost, sub-premium brand to the core brand – just like how VW, Renault and Nissan use Skoda, Dacia and Datsun, respectively.
On the other hand, Toyota has denied a report by the Nikkei business daily saying that the carmaker and Suzuki were holding partnership talks from a variety of angles – including a possible cross-shareholdings -- to take advantage of the growing demand for compact cars in India and other emerging economies.
Such a tie-up would help Toyota to penetrate in India, in which Suzuki controls about half of the passenger car market. However, Suzuki is a rival company of Daihatsu, both specializing in the same segment and targeting the same customers.
There are fears from analysts that if Toyota gains more control of Daihatsu, it would jeopardize a potential cooperation with Suzuki. Richter remarked that Toyota using Daihatsu as a sub-brand would be an effective weapon against Suzuki in markets like India.
However, Richter noted that such situation may put its business with Toyota at risk. Other analysts, meanwhile, said that a Toyota-Suzuki partnership could benefit both carmakers. For instance, Toyota could take advantage of Suzuki's huge distribution network in India.
In a note, JPMorgan analysts said that on Suzuki's part, it would get a stable shareholder in Toyota and gain Toyota's HEV/FCV and other next-generation environmental technologies. Suzuki, however, is expected to be cautious of any new partnerships, following a failed capital alliance with Volkswagen Group.
Suzuki and VW Group established an alliance in 2010, but they soon saw their relationship spiral downwards. Their dispute eventually reached arbitration court, resulting to the unwinding of their cross-shareholdings in 2015. With a 13.3-percent drop in global sales in 2015, Daihatsu was the weakest link in the Toyota group.
In fact, its weak results affected group sales negatively, causing it to drop 0.8 percent to 10.15 million. Good thing that the Toyota still managed to defend its crown as the largest carmaker in the world, outselling VW by a small margin. VW sold 9.93 million in 2015.
In Japan, Daihatsu remains in control of the min-vehicle market, commanding around 31 percent of the market in the first half of the fiscal year ending March 2016. Moreover, Daihatsu is the top maker of mini vehicles in a number of Southeast Asian markets.
Daihatsu has been building Toyota-branded minicars since 2011, and is involved in assembling vehicles for its parent in Indonesia. Daihatsu was established in March 1907 by two academics and a group of businessmen in Osaka, Japan.
Set up to produce internal combustion engines, the company changed its name to Daihatsu Motor in December 1951. Toyota has been a shareholder at Daihatsu since 1967, and has been its majority owner since 1998.