Toyota Thinks SMALL

Toyota Motors is thinking small for the future. It is betting on small cars (besides personal mobility), and made a US$3.2 billion decision in that direction with the total buy-out of its subsidiary, Daihatsu. Toyota previously owned 51.2% of Daihatsu, producer of kei cars, which will be fully integrated into Toyota after the completion of shares transfer in August. Subsequently, Daihatsu will take charge of the development of small car models for both brands, and contributing its cost-cutting and production efficiency expertise.

Toyota CEO, Akio Toyoda, explained the move during a press conference that followed days of speculation regarding the buy-out: “The importance of small cars is increasing.”

Not all automakers agree, though. A few days earlier, Fiat announced that it was leaving the small car market to focus on its SUVs and pickup trucks. Ford then announced that it would partner with other automakers to build small cars as demand of such vehicles are dropping due to cheaper petrol; meanwhile, demand of big gas guzzlers are rising instead.

Asian automakers are taking a different route from their American counterparts, believing that smaller, fuel-efficient cars would drive long-term growth in emerging markets where price is still the top selling point. After all, most of the high growth auto markets are dominated by the Japanese. A recent Forbes article reported that while the Japanese automakers are experiencing a downward trend in their own home country, it is quite the opposite in Indonesia. In 2015, Japanese car brands claimed 96.5% of the Indonesian market. Between January and November 2015, Ford sold below 5,000 units in Indonesia while Japanese brands sold almost a million units. In 2013, Nissan brought back the Datsun brand to serve the Asian market, launching its first model since its comeback, the city car GO, in India and then Indonesia.

Toyota Motors already covers a large portion of the market with its Toyota brand, joins the top tier brands with Lexus and, now, the entry level with Daihatsu. “Daihatsu will be for Toyota what Mini is for BMW,” said Daihatsu CEO, Masanori Mitsui.

We’re reminded of the move that Toyota made years ago, straying from the rest of the automotive pack when it launched the Prius before most of us had even heard of a hybrid car. We all know how that went (incredibly well, in case you don’t).

“We hope that 10, or 20 years from now, someone will say we made the right decision,” Toyoda said.

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