Toyota Motor Corp. is conducting feasibility study on introducing Daihatsu small car brand in India. If the approach appears true, Suzuki Motor Co., the market leader of small car segment is believed to witness a huge blow.
Daihatsu has been witnessing huge competition with Suzuki in Japan's mini car market. Suzuki dominates in India through Maruti Suzuki India Ltd. However, introducing Daihatsu in India will require all new models aiming to offer small cars at competitive and affordable price, reports Bloomberg quoting Naomi Ishii, managing director of Toyota's India unit, while narrating the entry barriers in an interview at the New Delhi Auto Show.
Suzuki has already won approval from shareholders in December to set up its first wholly owned car plant in its biggest market, bypassing local unit. India may leave behind China, US, Germany and Japan to become the world's third-biggest buyer of new vehicles in 2019, according to a research conducted by HIS Automotive.
Toyota has acquired controlling interest of 51% in Daihatsu in 1988. But now it is raising its stake to 100% by a reciprocal share-swap agreement. Under this agreement, Daihatsu's other shareholders will take 0.27 shares in the larger company for each share in the smaller. The agreement is scheduled to be implemented in August 2016. Consequently, the agreement has provided Toyota an opportunity to eye for establishing supremacy over Indian car market. Daihatsu will become a wholly owned subsidiary of Toyota by way of share exchange following the agreement, reports Toyota Global Newsroom. The purpose of the agreement is to develop of ever-better cars by adopting a unified strategy for the small car segment. Both the companies will enjoy freedom for focusing on their core competencies. As part of the new arrangement, the Daihatsu division will take the lead in developing new small cars, both for itself and for its parent company. Toyota in turn will also share key technologies with Daihatsu, and both will share each other's networks in emerging markets, reports AutoBlog. Both companies will utilize each other's bases of operations in emerging markets. Daihatsu will take the lead in enhancing efficiency and adaptability in development, procurement and production processes. Toyota's sales expertise and infrastructure will be utilized by both companies to improve Daihatsu's branding and profitability within Japan. Becoming a wholly owned subsidiary means that Daihatsu will be delisted from the stock exchange. But Daihatsu President Masanori Mitsui and Toyota President Akio Toyoda expressed their confidence for convincing the shareholders over the decision. Probably, Toyota President is eyeing far away yet to be reachable, one of the largest mini car market around the globe, India.
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