Toyota to enter Small Car Market

Toyota to enter Small Car Market

Toyota to enter Small Car Market

Toyota partners with Daihatsu to enter mini car market in Japan

As per the latest news, Toyota Motor Corporation the largest auto manufacturer in the world, is all set to get into the small cars (Kei Cars) market. The Japanese car maker recently announced that it would include the 660 cc mini cars made by its subsidiary company Daihatsu, in their product line in Japan, starting from autumn 2011. This is the first time Toyota will cater to the small car market in order to meet the rising demand for mini cars. Toyota would be last of the Japan's auto manufacturers to enter the small car market.

In Japan the major players that operate in the small car market are Daihatsu, Suzuki and Mitsubishi. Daihatsu 51% owned by Toyota is the largest mini car maker in Japan. Suzuki is the second largest mini car maker in Japan which also supplies small cars to brands such as Nissan and Mazda.

toyota small car

Toyota, it its latest alliance with Daihatsu, will market small cars manufactured by Daihatsu, under its own brand. Toyota has taken this step to strengthen its position in the Japan domestic market, as Toyota's profitability in overseas markets is going down because of a strong yen. This move also reflects Toyota's decision to expand its product line in the International market. Car makers like Suzuki became successful by adopting small car strategy to enter developing markets like India.

In Japan, mini cars (kei cars) have become very popular among cost conscious customers because of their low price, lower taxes, high fuel efficiency and overall lower running costs. Also, these small cars are well suited to narrow roads in Japan. Mini cars are fitted with engines that have capacities 660 cc or less. In the past couple of years, there was a big demand for bigger hybrid cars in Japan, because of the tax incentives offered by the Japanese government. However, these tax incentives are going to end soon, and there would be an increasing number of customers shifting to small cars. Of the overall auto market in Japan, mini cars sales were to the tune of 37 percent up from 32 percent in 2004 so auto makers in Japan can not ignore the small car market.

Toyota will target major cities and also some rural areas in north and south Japan for introducing mini cars under its own brand. Mini vehicles have about 50% market share in these rural areas. For Daihatsu, the bad news is that Toyota may become a big competitor in the mini car market; however, on the good side Daihatsu will increase its annual production of cars because of this new deal.

Daihatsu, as a part of the alliance, will supply 3 different mini car models to Toyota starting from autmn of 2011. Toyota plans to sell roughly 60,000 mini cars in its first year of introduction. Though this number may look very small compared to its global sales target of 7.5 million vehicles for 2010, this is definitely a great strategic move by Toyota.

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