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Toyota May Buy Out Little Daihatsu, Form Alliance with Suzuki

Alliances would help cement maker’s position as global auto sales leader.

by on Jan.28, 2016

Toyota was the world's best-selling automaker in 2015 and is considering two deals that would cement that position for 2016 and beyond.

Fresh on the heels of the announcement it had again sold more than 10 million vehicles in 2015, Toyota may make a series of moves that could cement its position as the world’s best-selling automaker.

The Japanese giant issued a statement confirming it is looking at the possibility of buying out the remaining shares of Daihatsu, a minicar maker it has worked with for nearly 50 years. But Toyota also denied reports that it might form a new partnership with Suzuki Motor Corp.

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“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, while also stressing no final decision has been made.

Toyota first allied with Daihatsu in 1967, and it now owns 51.2% of the little company. According to reports in Japanese media, the deal would cost about $3.1 billion at current stock prices for the remaining shares.

(Toyota retains global sales lead for 2015. For more, Click Here.)

Daihatsu, which failed to gain a foothold in the U.S. in the 1990s, focuses primarily on so-called Kei Cars. These pint-sized vehicles have become increasingly popular on the crowded roads of Japan, though Daihatsu sales slid 13.3% last year. One key reason was the overall malaise in the Japanese automotive market since consumer taxes were raised sharply two years ago

That was one reason why Toyota saw sales by its various brands – including the Toyota, Lexus, Scion and truckmaker Hino Motors – dip nearly 1% for the full year, to 10.15 million. That was still enough for Toyota to retain its crown as the auto industry’s global sales leader.

Second-ranked Volkswagen moved 9.93 million cars, trucks and crossover in 2015, down about 2%. Among other things, the German maker has been hurt by a global scandal over its admitted cheating on diesel emissions tests

It’s unclear what sort of changes Toyota might seek to make at Daihatsu were it to take complete ownership. Under Japanese law, it already has the power to appoint top executives, including the Daihatsu CEO.

(Click Here for details about Jeep setting a new sales record in 2015.)

Equally unclear is what Toyota might want to do with Suzuki – at least if reports by Japan’s Nikkei business daily prove accurate.

Like Daihatsu, Suzuki largely focuses on the lower end of the market, many of its vehicles powered by engines of less than 660 cc’s displacement. A potential complication is the fact that Suzuki has long seen Daihatsu as one of its key competitors.

But Suzuki does have one tempting jewel that Toyota might want to exploit to its advantage: a vast distribution network in India that is quickly starting to outpace China in terms of sales growth.

Suzuki, which also abandoned the U.S. market in 2013, nonetheless controls about 40% of the Indian market through its dominance of Maruti Suzuki India Ltd., a joint venture with a local manufacturer.

(To see more about GM setting a new global sales record last year, Click Here.)

“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 toward future vehicle electrification,” analysts with JPMorgan said in a new report.

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