Toyota planning to buy out Daihatsu from Suzuki

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Toyota Motor Corporation has confirmed that they are looking to completely buy Daihatsu, which is a small car subsidiary partially under its umbrella. According to various sources, the takeover could cost Toyota somewhere in the region of $3.1 billion. Other than this, Toyota was also rumoured to be cooking up plans to work alongside major rivals Suzuki even though both the companies have not confirmed the same.

Daihatsu is one company that has been witnessing rising shares prices of 16 percent as buy orders have been increasing. In view of the same, Toyota has seen a rise in its shares of 3.8 percent, while Suzuki has witnessed a rise of 11 percent. If Toyota is able to buy out Daihatsu from Suzuki, then this will enable the Japanese car major to gain access to cheaper purchasing costs for its own small car business. This will also help Toyota to gain some momentum in the small passenger vehicle segment in India which is currently dominated by rivals Suzuki who are in partnership with local company Maruti.

According to a company statement, Toyota is considering a number of possibilities for Daihatsu including partnerships and business restructuring. They are planning to own Daihatsu completely from their current 51.2 percent share.

Even as Daihatsu’s share prices see an increase, the company’s sales have seen a drop in 13.3 percent. This made Daihatsu the worst performing company owned by Toyota, which includes other famous brands including Hino Motors (Japanese truck manufacturer) and Lexus. Reuters reports that Daihatsu’s drop in sales directly had its impact on Toyota with the latter seeing a drop in overall sales of 0.8 percent to 10.15 million units as a result. This comes in light of the fact that Toyota was the largest car manufacturer in the world with main rivals Volkswagen ending the previous year at 9.93 million units.

The Nikkei Business Daily in a report stated that Toyota and Suzuki are holding discussions to form a partnership that will help both the companies across various domains to capitalise on growing small and compact car markets including India. However, it looks like Toyota is concentrating on moving forward on its own and improve its hold in the entry-level car market rather than playing along with Suzuki in the process. Daihatsu will help in taking this very fact forward for Toyota as the company is known for its famous 660cc Kei range of cars retailing in Japan. A CLSA research analyst, Christopher Richter says that Toyota is trying to use Daihatsu as a low-cost brand in other countries much like Renault uses Dacia and Nissan uses Datsun. This could enable the company to gain a stronger hold in emerging markets.

However, many analysts also feel that the two car manufacturers could majorly benefit by working alongside each other. For example, Maruti Suzuki’s superb service network could help Toyota access more regions of the country thereby improving market reach. Suzuki on the other hand can get access to Toyota’s HEV technology that can help them create greener cars in the coming future.