Toyota Motor Corp. recently claimed that they are seriously considering purchasing the remainder of Daihatsu for $3.1 billion. At the moment, they own 52 percent of Daihatsu.
There are also claims that Toyota is in partnership talks with Suzuki – one of Daihatsu’s arrivals. Interesting to note, Toyota denies this.
If Toyota were able to completely take over Daihatsu, it would reduce procurement costs for the smaller company. This would also give Toyota the opportunity to leverage the low-cost brand to their advantage.
If Toyota was in partnership talks with Suzuki, then Toyota might be of the make some headway into India – a car market where Suzuki commands the majority share.
At the moment, Toyota claims that no decisions have been made but they are always considering various ways that they can partner with Daihatsu.
The Daihatsu Brand
Daihatsu is a special brand to Japan. They specialize in 660cc engines, easily competing with Suzuki. Unfortunately, Daihatsu is the weakest player in the Toyota group. Its global sales fell 13.3 percent in 2015. Unfortunately, that also puts Toyota sales down by 0.8 percent for a total sales figure of 10.15 million vehicles sold last year.
Not to put too much of a damper on it, Toyota still retains the title of the world’s largest automaker. Volkswagen, the vehicle maker who came in second, sold 9.93 million vehicles in 2015.
There’s an enormous demand for compact cars in India. Partnership cost between Suzuki and Toyota could offer the opportunity necessary to capitalize on the opportunity. However, if Toyota were to take over Daihatsu, Suzuki would be put at odds. You see, the Daihatsu and Suzuki fiercely compete for the same customers. The takeover would put Toyota on the opposite side of the table from Suzuki.
One analyst noted that it is certainly possible that Toyota could be planning on using Daihatsu as a low-cost, sub- premium brand. The merger of the two would certainly put Toyota on the map in India and can be used as an effective weapon to diminish the Suzuki name in the country.
Of course, such a merger could also benefit both companies. Suzuki has claim to a network in India, through its Maruti Suzuki India Ltd. brand that Toyota would gain access to and greatly benefit from. Another analyst from J.P. Morgan did note that Toyota would be an excellent and stable shareholder in the Suzuki profile. Furthermore, Suzuki might gain access to proprietary Toyota technologies in the race to make electric vehicles.