Toyota Motor Corp. said Friday it will make Daihatsu Motor Co. a wholly owned subsidiary in August as the world’s top automaker seeks to revamp its low-priced small-car business amid growing demand in emerging markets.
Toyota, which holds a roughly 51 percent stake in Daihatsu, will acquire the remaining shares through a share exchange allocating 0.26 Toyota share for each Daihatsu share.
Daihatsu, which makes the Tanto and Cast, is expected to be delisted from the first section of the Tokyo Stock Exchange on July 27, with the share exchange scheduled to take place on Aug. 1.
Toyota has enjoyed robust sales in North America, but there appears to be room for growth in emerging markets such as India.
The deal would enable Toyota to capitalize on Daihatsu’s strength in small cars, a key segment in emerging markets.
For Daihatsu, which holds an approximately 30 percent share of Japan’s minicar market, can use Toyota’s advanced technology and cut procurement costs.
Toyota President Akio Toyoda said Friday evening that small cars have taken on greater importance for the auto giant, but that there is still room for bolstering Toyota’s own presence in the category and create “good chemistry” between the two automakers.
“We need to gain more know-how on small cars than ever, or we will lose our opportunity to achieve a breakthrough in the future,” Toyoda said at a news conference in Tokyo with Daihatsu President Masanori Mitsui beside him.
Both Toyoda and Mitsui stressed that the Daihatsu brand will remain after the buyout deal.
Mitsui acknowledged that Daihatsu does not have the resources needed to expand its global reach even as automakers are scrambling to develop eco-friendly cars and next-generation technologies like autonomous driving.
“Ultimately, I hope to take our Daihatsu brand to any country where it is needed, not just in Malaysia and Indonesia,” Mitsui said.
The announcement came after media reports that Toyota and Daihatsu’s rival Suzuki Motor Corp. are investigating the potential for a wide-ranging partnership with an eye to emerging markets.
For the fourth straight year, Toyota, which has just rolled out its fourth generation Prius hybrid, remained the world’s top seller in 2015. Its worldwide group sales stood at over 10 million vehicles, beating rival Volkswagen AG, which was stung by an emission cheating scandal.
After entering a business alliance with Daihatsu in 1967, Toyota made the Ikeda, Osaka Prefecture-based company a subsidiary in 1998. Daihatsu sold 794,000 units worldwide between January and December in 2015, marking a 13.3 percent drop from the previous year.
In Japan, sales of minivehicles, equipped with engines no larger than 660 cc, remain sluggish following the country’s consumption tax hike and a higher ownership tax levied on vehicles in the category.