Daihatsu looks to Brazil for growth

Daihatsu Motors says it plans to launch compact cars in Brazil, as parent company Toyota Motor Corp looks to its minicar subsidiary to help it expand in emerging markets and produce lower-cost, quality vehicles.

Toyota, the world's No. 2 automaker, wants to apply its smaller partner's expertise in affordable, reliable pint-sized cars to its own passenger models as it grapples with higher costs and stiff global competition to produce increasingly sophisticated cars.

"There's a market for compact cars in markets like Brazil," Daihatsu President Soichiro Okudaira said.

"Toyota sells similar models across Asia and South America, and Brazil has been an important market for models like the Corolla, although they were in a slightly larger class."

Okudaira, chief engineer of the last two generations of Toyota's Corolla series, was dispatched from Toyota earlier this month to lead Daihatsu. He declined to offer additional details on when or in what capacity the carmaker would expand in Brazil.

Toyota has a market share of about 9 percent in Brazil, where it sells the Etios subcompact hatchback and the Corolla and Camry sedans, along with SUVs and trucks. Any expansion there will see it come up against market leaders FCA, General Motors Co and Volkswagen AG.

Brazil, a top-10 global market for cars, could be a tough market for expansion as a deepening recession and political uncertainty has sapped auto sales in recent years. The country posted total sales of about 2 million in 2016, having fallen sharply from 3.5 million in 2010.

Daihatsu is Japan's largest maker of minicars with engines no bigger than 660cc made specifically for the domestic market as a low-cost alternative to passenger cars. Toyota has already enlisted Daihatsu to help develop compact cars for emerging markets including India.

Toyota President Akio Toyoda last month said he was betting on minicar technology to simplify the way it manufactures regular cars at lower cost. Toyota has set up in-house companies to specialise in small cars and emerging markets, which are big markets for smaller models.

Okudaira said the two companies were still mulling their strategy for India and other emerging markets, including whether to launch compact cars under the Daihatsu or Toyota brands and securing a high-quality supply chain.

Toyota has struggled to grow its market share at the affordable end of India's car market, a sector dominated by domestic rival Suzuki Motor Corp.

© 2017 Thomson Reuters