Toyota may buy over Daihatsu for $4.6 billion

NICHE PLAYER: Daihatsu's Copen Robe on display at Tokyo Auto Salon earlier this month. The Japanese carmaker, in which Toyota owns a stake, focuses on 660cc minivehicles and compact cars.


    Jan 28, 2016

    Toyota may buy over Daihatsu for $4.6 billion


    TOYOTA Motor Corp said it was considering buying out the rest of minivehicle maker Daihatsu Motor Co, a US$3.2 billion (S$4.6 billion) deal at current market prices, but denied a report that it was in partnership talks with Daihatsu rival Suzuki.

    Shares in Daihatsu soared 20 per cent in late trade yesterday after being overwhelmed by buy orders throughout the day. Shares in Suzuki jumped 11 per cent despite denials from both Toyota and Suzuki.

    Toyota rose 3.6 per cent.

    Full control of Daihatsu could help Toyota leverage the lower-cost brand better and cut procurement costs for Daihatsu while capital ties with Suzuki would help the world's largest automaker make inroads into India where Suzuki commands around half the car market.

    "We are constantly considering a number of possibilities relating to Daihatsu, such as partnerships or business restructuring, including making the company a fully owned subsidiary," Toyota said in a statement. But it added that no decisions had been made.

    Toyota owns 51.2 per cent of Daihatsu which, like Suzuki, specialises in 660cc minivehicles, a segment particular to Japan, as well as compact cars.

    The Nikkei business daily said Toyota and Suzuki were discussing ties from a variety of angles, including a possibility of cross-shareholdings as they look to capitalise on the demand for compact cars in India and other emerging economies.

    Some analysts noted that greater control of Daihatsu could be at odds with potential cooperation with Suzuki, given that the two minivehicle makers are fierce competitors for the same customers.

    "I can easily see the Daihatsu brand used in the same way that VW uses Skoda or Renault uses Dacia or Nissan uses Datsun as a low-cost, sub-premium brand to the core brand," CLSA senior research analyst Christopher Richter said.

    "That could be a very effective weapon against Suzuki in places like India... if I were Suzuki, that would sound like a risk to doing business with Toyota."

    Still, others noted that a potential Toyota-Suzuki partnership could benefit both.

    Suzuki, through its control of Maruti Suzuki India, has a vast distribution network in that country that Toyota could greatly benefit from.

    "Suzuki would meanwhile be getting a stable shareholder in Toyota as well as access to Toyota's HEV/FCV and other next-generation environmental technologies geared towards future vehicle electrification," said JPMorgan analysts.