Toyota to make Daihatsu a 100% subsidiary; entrusts A-segment development

Daihatsu technologies become core for strengthening emerging market operations

2016/03/28

Summary

Toyota Agya
The Agya, a fuel-efficient car sold in Indonesia by Toyota, was planned, developed, and produced by
Daihatsu and supplied to Toyota under an OEM agreement (photo: courtesy of Toyota Astra Motor)

 Toyota Motor Corporation and Daihatsu Motor Co., Ltd. announced in January 2016 that Toyota will turn Daihatsu into a wholly owned subsidiary, and that Daihatsu will take charge of developing A-segment cars for both brands based on the mini vehicle technology it has fostered until now. Daihatsu has been engaged in the consigned production of vehicles jointly developed with, and OEM supply of its vehicles to Toyota. Daihatsu will henceforth fully take charge of developing small cars for the Toyota Group and expand the regions in which these vehicles are sold.

 Daihatsu developed an A-segment platform based on the Mira e:S. The company used this platform to develop the Toyota Agya and Daihatsu Ayla for the Indonesian market, and sales have been strong. Daihatsu also released models based on the platform in the Philippines (a Toyota brand vehicle) and Malaysia (a Daihatsu brand vehicle). These activities seem to indicate the direction of future cooperation between the two companies. A small car developed by Daihatsu is also scheduled for release in Thailand.

 Toyota's vehicle sales have stalled over the past 2 to 3 years in emerging markets including Asia, but the Toyota Group intends to strengthen operations in those countries by taking advantage of Daihatsu's fuel manufacturing expertise for fuel efficient, low-cost vehicles.


Related Reports:
Indonesia: Economic stimulus measures may boost sales in H2 2016 (March 2016)



Toyota to make Daihatsu a wholly-owned subsidiary; Daihatsu to lead Group A-segment car development

 In January 2016, Toyota announced that Daihatsu is scheduled to be made a wholly-owned subsidiary of Toyota in August 2016, that the A-segment car operations for both brands will be strengthened with a unified global strategy.

 Until now, Toyota has developed small cars by applying technologies to them acquired through the development of mid-sized cars. However, implementing the Toyota New Global Architecture (TNGA) has, in the words of Toyota President and CEO Akio Toyoda, "made the company aware of the difficulties involved in developing small cars," and Toyota has decided to hand that work over to Daihatsu since its cost-, size- and weight-reduction expertise is slightly superior.

 Unlike Toyota, Daihatsu has been developing A-segment cars based on mini vehicle platforms. It is taken as a given that Daihatsu will produce cars in its own way with architecture different from the TNGA.

 At the same time, Daihatsu has been under pressure to work on next-generation technology, and significant resources would be needed to undertake that challenge independently, so from that perspective this decision is expected to produce significant merits.

 The Daihatsu brand will continue to exist and be strengthened. The company is looking to take a role like that of the Mini brand in the BMW Group. The Toyota Group will be comprised of the Toyota, Lexus, and Daihatsu brands, and each of them will have their respective characteristics made distinct (Toyota will discontinue the Scion brand that it established in North America in 2003).

Toyota: Turning Daihatsu into wholly-owned subsidiary; strengthening both brands' small car operations

Wholly-owned subsidiary  Toyota and Daihatsu reached an agreement whereby Daihatsu will become a wholly-owned subsidiary of Toyota by way of a share exchange (scheduled to be completed in August 2016). The companies agreed to make further progress in selection and concentration of operations under a unified strategy, and to advance "better car production" all the more for both brands.
A-segment car strategy  Product lineups that are optimal for various customers will be expanded by advancing the differentiation of Toyota and Daihatsu's brands.
 Daihatsu will make further hone its expertise and processes related to product planning and technological development for mini-vehicles, and develop products within the scope of A-segment cars for both brands.
Technology strategy  Toyota and Daihatsu will share development strategies for new technologies from the initial stages.
 Toyota will continue to develop technologies related to the environment, safety, security, and comfort. Daihatsu will pursue its aptitude for turning technologies into packages for vehicles, as well as developing cost- and fuel-efficient technologies. Daihatsu will also foster the development of leading-edge technologies from the perspective of cost-efficiency and miniaturization.
 Daihatsu's specialized car manufacturing expertise will be shared within the Toyota Group and contribute to enhancing the cost competitiveness of upper-line models.
Region-based strategies  In emerging markets, both companies will utilize each other's bases of operations. Daihatsu will take the lead in enhancing speed and efficiency in development, procurement, and production processes.
 Within Japan, Toyota's sales expertise and infrastructure will be utilized by both companies to improve Daihatsu's branding and profitability.

Source: Toyota and Daihatsu's joint press release from January 29, 2016

 

The main points from a speech by Toyota's President

Difficulties in developing A-segment cars  Implementing the TNGA has made the company aware of the difficulties involved in manufacturing small cars. At the same time, the importance of small cars is increasing like never before due to factors like ever-greater environmental issues, and the continued long-term growth of emerging markets.
 In certain regions like North America, Toyota's strength lies in the mid-sized sedan segment and above, and the company has a good track record in development of environmental and other advanced technologies, but Toyota has not managed to make its presence felt with A-segment cars.
Toyota to entrust A-segment car business to Daihatsu  Unless the company gains the know-how necessary to better develop small cars, Toyota may lose the chance to make crucial breakthroughs for future growth.
 Toyota has a long and credible history of producing small vehicles itself, but the company has decided to shelve those concerns and its desire for self-sufficiency, and entrust its A-segment vehicle business to Daihatsu.
The main points from a speech by Daihatsu's President
A-segment car strategy  The two companies' domestic and international strategy has been to develop and market similar "sibling" models like the Daihatsu Boon and Toyota Passo, or the Daihatsu Xenia and Toyota Avanza. Going forward, both companies will focus on further differentiating those designs and specifications, and offering ever-better cars that fully leverage the unique strengths of both brands.
Technology strategy  The two companies will together formulate strategies for next-generation technologies from the initial conceptual stages, combining Toyota's world-leading research into cutting-edge technologies with Daihatsu's expertise in miniaturization and lowering costs. This will allow both companies to implement cutting-edge technologies into small cars and mini vehicles earlier and more affordably.
Strategy for emerging markets  In emerging markets, Daihatsu will show leadership and offer its own manufacturing expertise to assist in the growth and development of operations. Both companies will use each other's manufacturing bases and work to improve the speed and effectiveness of processes for business planning, development, procurement, and production.

Source: Toyota and Daihatsu's joint press release from January 29, 2016

 

Toyota to shift to new organization with seven product-based in-house companies

 Toyota announced in March 2016 that it will reorganize its structure and create seven product-based in-house companies. The aim of this structural reform is to improve responsiveness to market needs in an effort to maintain global sales of 10 million units and a market share of at least 10% in each region.

 Of the seven in-house companies, Toyota Compact Car, Mid-size Vehicle, CV, and Lexus International will be in charge of vehicles, and these classifications will correspond with the TNGA. However, small cars to be developed by Daihatsu will be based on mini vehicle platforms and essentially different from the TNGA. It seems that Daihatsu will be positioned separately from the seven business units announced in March. 

Overview of Toyota's new organization

Related vehicle manufacturers
Head Office Head-office functions
Business units Continuation Business Unit Toyota No.1 (in charge of North American , European, African, and Japanese operations)
Business Unit Toyota No.2 (in charge of emerging markets)
Seven newly-formed product-based in-house companies Innovative R&D and Engineering Company
Toyota Compact Car Company Toyota Motor East Japan
Mid-size Vehicle Company
CV Company Toyota Auto Body
Lexus International Co. Toyota Motor Kyushu
Power Train Company
Connected Company

 Source: Toyota press release March 2, 2016 (Note) Toyota Motor East Japan, Inc. produces the Corolla Fielder, Aqua, and other vehicles at its Iwate Plant; the Corolla Axio and other models at its Miyagi Ohira Plant; and the Century, Crown sedan, and other models at its Higashi Fuji Plant.

 

 



Cooperation between Toyota and Daihatsu until the present

 Daihatsu has been engaged in consigned production of vehicles jointly developed with Toyota for decades, and supplied its vehicles to Toyota under an OEM arrangement. Daihatsu produced a total of 327,000 Toyota-brand vehicles for the period from April through December 2015 (363,000 units compared to the previous year), including 119,000 units in Japan and 209,000 units outside Japan (Indonesia). Daihatsu started producing mini vehicles on Toyota's behalf under an OEM arrangement in Japan in September 2011.

Business tie-up between Toyota and Daihatsu (consigned production and OEM)

SOP Toyota-brand vehicles Daihatsu-brand vehicles Arrangement Developed by
Production in Japan June 2002 Succeed/ProBox Consigned production Toyota
May 2004 Passo (Note 1) Boon Joint development/ consigned production Toyota and Daihatsu
January 2006 Rush Be-go (Note 2) OEM Daihatsu
bB Joint development/ consigned production Toyota and Daihatsu
May 2006 Sienta Consigned production Toyota
September 2011 PIXIS SPACE Move Conte OEM Daihatsu
PIXIS VAN HIJET Cargo
PIXIS TRUCK HIJET Truck
PIXIS EPOCH Mira e: S
July 2015 PIXIS MEGA Wake
SoP Toyota-brand vehicles Daihatsu-brand vehicles Arrangement Developed by
Overseas Production (Indonesia) December 2003 Avanza Xenia Joint development/ consigned production Toyota & Daihatsu
December 2006 Rush Terios (Note 2) OEM Daihatsu
January 2008 Town Ace/Lite Ace Gran Max OEM (exported to Japan)
September 2013 AGYA AYLA OEM
Source: Daihatsu's Company Profile Data Book 2015
(Notes) 1. Both the Toyota Passo and Daihatsu Boon will undergo their second full redesign in 2016. Both models will come with a collision avoidance system. The collision avoidance system of the Passo will be Daihatsu's Smart Assist II rather than the Toyota Safety Sense C (Each system incorporates laser radar and a monocular camera).
2. The Be-go marketed by Daihatsu in Japan is called the Terios in other countries.
3. Daihatsu also supplies mini vehicles to Fuji Heavy Industries Ltd. under an OEM arrangement.

 

Toyota and Daihatsu launch vehicles built on Daihatsu's A-segment platform in Southeast Asian markets

 The Toyota Agya and the Daihatsu Ayla, which were launched in Indonesia in 2013, are built on an A-segment platform that Daihatsu developed based on its Mira e:S technology. They are available at affordable prices that are half those of the Yaris and Vios, although these models are in a different vehicle class.

 Vehicles based on the A-segment platform are also marketed in the Philippines and Malaysia. This may indicate the direction of future cooperation between the two companies. 

Launch of vehicles built on Mira e:S-based A-segment platform

Japan  Daihatsu's Mira e:S went on sale in September 2011. It was sold at an affordable price of JPY 795,000 (including tax) and had a fuel economy of 30.0 km/liter under the JC08 testing standard, which was the top fuel efficiency among gasoline vehicles at the time. The partially-redesigned Mira e:S launched in July 2014 with a fuel economy of 35.2 km/liter that again achieved what was then the top fuel efficiency among gasoline vehicles. 
Indonesia  Daihatsu developed a car based on its global A-segment platform, to which it had applied its cost- and fuel-efficient technologies and expertise accumulated through the Mira e:S. The model conforms to the Indonesian government's Low Cost Green Car (LCGC) program. Daihatsu launched it as the Ayla and Toyota, to which it was supplied by Daihatsu on an OEM basis, launched it as the Agya. 
The Philippines  In February 2014, Toyota and Daihatsu started exporting the A-segment Ayla, which Daihatsu produces in Indonesia, to the Philippines. This was the first LCGC model exported from Indonesia. Toyota launched it as the Wigo in the Philippines.
Malaysia  In September 2014, Daihatsu launched the Axia, an Ayla-based car optimized for the Malaysian market. The Axia is built at Perodua, and is the first Malaysian car that complies with the Energy Efficient Vehicle (EEV) eco-car policy promoted by the Malaysian government.

 

Prices of Toyota's key models sold in Indonesia

Price (in millions of rupiah)
Small cars Agya 113 to 136
Etios Valco 149 to 176
Yaris 228 to 269
Vios 280 to 317
Cars Corolla Altis 408 to 444
Camry 560 to 759
Price (in millions of rupiah)
Minivan Avanza 184 to 214
IMV Fortuner 442 to 557
Kijang Innova 314 to 427
Hilux S Cab 199 to 322
Hilux D Cab 383 to 440
Source: Toyota Astra Motor
(Notes) 1. Based on an IDR 1,000 : JPY 8.65 exchange rate as of early March 2016, prices for the Ayla range from JPY 978,000 to JPY 1,174,000.
2. Camry's highest grade is the Camry Hybrid.

 Of the Mira e:S-based A-segment vehicles described above, the models marketed in Indonesia and Malaysia are compliant with the eco-car policies of the countries they are sold in. While market demand and Toyota's sales are declining in Asia (see following section), all OEMs' production of eco-cars designated as fuel-efficient cars by the Thai government increased from 242,000 units in 2014 to 342,000 units in 2015. Although all OEMs' 2015 sales volume of LCGC vehicles in Indonesia decreased by 7,000 units year-on-year (y/y), but there are signs of sustained LCGC vehicle popularity, including their share of the Indonesian automotive market expanding from 14.0% to 16.3%.

 Toyota and Daihatsu plan to develop a new small car for the Thai market.

 

Eco-cars in three Southeast Asian countries

Outline of certification standards Sales of Toyota and Daihatsu models that meet standards
Thailand Eco-Car  Achieving an annual production volume of 100,000 vehicles with fuel economy of at least 20 km/liter within five years, etc.  The Toyota Yaris (1200cc) was certified in 2013. In 2015, 35,000 units were sold.
 Overall eco-car production in Thailand was 242,000 units in 2014, and 342,000 units in 2015.
Indonesia LCGC (Low Cost Green Car)  Fuel economy of at least 20 km/liter, engine displacements of up to 1200cc for gasoline models and 1500cc for diesel models, vehicle price caps, etc.  In 2015, Toyota sold a total of 333,000 vehicles in Indonesia, of which the Agya was sold at 56,000 units.
 Among a total of 161,000 units sold by Daihatsu, 35,000 units were Ayla.
 The Toyota Group accounted for 55% of Indonesia's total 2015 LCGC vehicle sales of 165,000 units.
Malaysia EEV (Energy Efficient Vehicles)  A fuel economy criterion is defined for each segment (= vehicle weight). Consequently, large vehicles can be certified. The program applies to vehicles including hybrid vehicles, electric vehicles, and alternative-fuel vehicles.  In September 2014, Daihatsu launched the Axia. In 2015, the company sold a total of 156,000 passenger cars, of which 102,000 units were Axia.

 

 



Toyota's vehicle sales by region: declining sales in Asia and other emerging markets

Toyota's Consolidated Unit Sales by region This section summarizes Toyota's weak sales performance in emerging markets, which may be a factor underlying the decision made by Toyota and Daihatsu.

 Although Toyota has ranked first in global vehicle sales for four consecutive years, from 2012 to 2015, the company's consolidated vehicle sales declined in FY 2015 and are expected to decline in FY 2016. Total retail unit sales that include China also failed to grow. While consolidated vehicle sales in North America for FY 2016 are likely to increase by 5.7% to 2.87 million units and those in Oceania will be 250,000 units, the same level as FY 2015, vehicle sales in other regions are expected to decrease.

 Toyota continues to be dependent on North American vehicle sales. Vehicle sales in Asia rapidly expanded from 980,000 units in FY 2010 to 1.68 million units in FY 2013, but have continued to decrease over the ensuing years, and are expected to decrease by 11.3% y/y to 1.32 million units in FY 2016.

Toyota's unit sales

(1,000 units)
FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 Outlook FY2016/ FY2015
Consolidated unit sales Japan 2,163 1,913 2,071 2,279 2,365 2,154 2,120 -1.6%
North America 2,098 2,031 1,872 2,469 2,529 2,715 2,870 5.7%
Europe 858 796 798 799 844 859 840 -2.2%
Asia 979 1,255 1,327 1,684 1,609 1,489 1,320 -11.3%
Latin America 231 281 289 364 413 422 390 -7.6%
Oceania 251 248 223 271 259 250 250 0.0%
Africa 184 209 214 259 267 245 200 -18.4%
Middle East 466 569 550 741 824 830 760 -8.4%
Others 7 6 8 5 6 8
Worldwide 7,237 7,308 7,352 8,871 9,116 8,972 8,750 -2.5%
Total retail unit sales including China 8,139 8,423 8,334 9,692 10,133 10,168 10,050 -1.2%
Source: Toyota's consolidated results
(Notes) 1. Consolidated vehicle sales exclude those of Toyota vehicles built in China to which the equity method applies.
2. Retail unit sales include those of Toyota vehicles built in China (Daihatsu and Hino included). Toyota's vehicle sales in China in the calendar year 2015 increased by 8.7% y/y to 1,122,000 units for an all-time high. Toyota's sales target in China in CY 2016 is set at 1.15 million units, up 2.5% y/y.
3. FY 2016 Forecast shows figures announced in FY2016 3Q Financial Results by Toyota on February 2016.

 

Southeast Asia: slump in major Indonesian and Thai markets

Unit Sales in major Southeast Asian countries Total sales volume (market demand) in six key Southeast Asian countries decreased by 4% y/y in 2015 to about 3 million units, recording a decline for the second consecutive year. Sales volume decreased by 13% from the peak level in 2013. The decrease in sales volume was attributed to a slump in the two major markets Indonesia and Thailand. In Thailand, sales volume in 2015 was almost half its 2012 peak.

 Preliminary results for January 2016 saw significant declines in the three major markets, with sales of  84,885 units in Indonesia (down 11.7% y/y), 51,821 units in Thailand (down 9.9%), and 44,591 units in Malaysia (down 11.9%) and poor prospects for recovery in six South East Asian countries.

 

 



Production Forecast by LMC Automotive: Toyota Group's production in 2019 to reach 10.5 million units

(LMC Automotive, January 2016)

Toyota Group's production forecast by major country According to LMC Automotive's January 2016 production forecast, the Toyota Group's light vehicle production in 2016 will be 10.0 million units, up 1.5% from 9.89 million units in 2015, and 10.47 million units in 2019, up 5.8% from 2015. LMC Automotive anticipates that the group's sales growth in the ASEAN and South American markets will slow down for a few years from 2015, with global production remaining at 10 million units. However, for the long term, the company expects to see global production increases supported by growth in overseas sales, although future sales increases are not forecast for the Group's home market of Japan.

 Annual production in Japan in 2013 and 2014 exceeded 4 million units, but it is expected to decline between 2015 and 2019 to less than 4 million units, and gradually decrease to 3.8 million units in 2019. LMC Automotive does not anticipate any rapid rise in exports from Japan, as the group is strengthening its overseas production.

 In North America, U.S. production was 1,336K units in 2015, but is forecast to decrease to 1,247K units in 2019. Production in Canada is expected to remain at 560-600K units between 2015 and 2019. Production in Mexico, most of which is for the U.S. market, is forecast to be 100-160K units between 2015 and 2018, but this is expected to rapidly increase to 305K units in 2019, more than doubling production in 2018.

 Production in China in 2015 was more than 1 million units, but is expected to be less than 1 million units between 2016 and 2019. LMC Automotive forecasts Toyota Group's production in China to reach 1 million units again after 2019.

Toyota Group's light vehicle production in 2019 will be 10.5 million units (LMC Automotive)

GLOBAL MAKE 2013 2014 2015 2016 2017 2018 2019
Toyota Group Toyota 8,536,403 8,427,916 8,325,672 8,393,625 8,266,693 8,518,716 8,842,156
Daihatsu 979,972 1,029,292 881,708 934,803 909,391 887,058 869,091
Lexus 504,303 598,692 618,347 645,356 655,767 677,284 689,506
Hino 70,962 76,871 66,460 64,657 65,085 64,081 67,913
Total 10,091,640 10,132,771 9,892,187 10,038,441 9,896,936 10,147,139 10,468,666
Japan Toyota 3,008,346 2,796,901 2,704,924 2,739,634 2,652,749 2,696,695 2,672,244
Daihatsu 675,514 703,677 639,760 692,218 648,616 593,688 553,670
Lexus 418,067 494,616 518,623 495,146 509,875 528,561 534,631
Hino 60,022 65,931 53,382 40,907 40,472 38,365 41,497
Japan sub-total 4,161,949 4,061,125 3,916,689 3,967,905 3,851,712 3,857,309 3,802,042
USA Toyota 1,288,714 1,335,556 1,332,166 1,304,177 1,286,900 1,285,868 1,192,439
Lexus 0 0 4,088 50,415 49,737 47,787 54,730
USA sub-total 1,288,714 1,335,556 1,336,254 1,354,592 1,336,637 1,333,655 1,247,169
China Toyota 857,732 963,981 1,007,253 952,256 885,426 920,065 988,994
Thailand Toyota 863,917 732,027 642,340 669,370 699,558 743,985 787,709
Hino 264 0 189 67 88 89 100
Thailand sub-total 864,181 732,027 642,529 669,437 699,646 744,074 787,809
Indonesia Toyota 421,054 394,284 354,158 368,537 370,474 384,246 382,943
Daihatsu 304,048 325,555 241,858 242,209 260,094 292,589 314,469
Hino 2,682 3,438 4,676 14,822 14,997 15,626 16,007
Indonesia sub-total 727,784 723,277 600,692 625,568 645,565 692,461 713,419
Canada Toyota 419,100 475,052 492,845 486,297 495,398 477,934 463,089
Lexus 86,236 104,076 95,636 99,795 96,155 100,936 100,145
Canada sub-total 505,336 579,128 588,481 586,092 591,553 578,870 563,234
India Toyota 173,773 147,717 158,709 165,523 213,789 260,210 332,419
Mexico Toyota 63,677 71,248 107,243 155,150 136,767 130,218 305,018
Turkey Toyota 102,260 131,504 115,893 156,843 212,125 226,048 246,129
UK Toyota 179,233 172,215 187,328 179,694 163,932 168,458 219,063
France Toyota 192,135 207,283 218,985 212,629 208,801 239,646 218,523
Taiwan Toyota 170,257 200,498 179,650 176,704 181,996 186,353 188,550
Hino 2,486 2,770 2,915 2,362 2,452 2,531 2,548
Taiwan sub-total 172,743 203,268 182,565 179,066 184,448 188,884 191,098
Brazil Toyota 134,721 150,241 158,322 142,940 148,890 160,596 169,344
South Africa Toyota 155,233 138,356 125,088 147,765 152,599 151,651 164,711
Russia Toyota 43,122 51,392 39,511 52,363 63,785 72,114 78,961
Argentina Toyota 94,468 95,959 79,632 74,900 72,787 77,559 77,871
Malaysia Toyota 72,750 80,505 78,933 61,972 63,701 67,009 70,066
Hino 5,508 4,732 4,086 5,906 6,448 6,842 7,132
Malaysia sub-total 78,258 85,237 83,019 67,878 70,149 73,851 77,198
Czech Republic Toyota 69,383 69,997 91,199 88,170 82,757 80,038 68,789
Philippines Toyota 34,869 42,040 50,518 54,799 56,237 63,273 67,523
Vietnam Toyota 33,949 34,880 44,406 49,700 53,952 59,955 63,214
Hino 0 0 1,212 593 628 628 629
Vietnam sub-total 33,949 34,880 45,618 50,293 54,580 60,583 63,843
Pakistan Toyota 37,828 41,379 64,141 63,094 57,088 58,171 60,565
Austria Toyota 0 0 0 0 0 433 13,497
Venezuela Toyota 8,930 3,220 3,553 3,533 4,074 5,025 7,002
Daihatsu 410 60 90 376 681 781 952
Venezuela sub-total 9,340 3,280 3,643 3,909 4,755 5,806 7,954
Portugal Toyota 1,631 805 1,734 2,029 2,201 2,232 2,359
Kazakhstan Toyota 0 750 286 690 707 934 1,134
Australia Toyota 109,321 90,126 86,855 84,856 0 0 0
Source: LMC Automotive "Global Automotive Production Forecast (January 2016)"
(Note) 1. Data indicates figures of only small-size vehicles, including passenger cars and light commercial vehicles with gross vehicle weights of under 6 ton.
2. All rights reserved. Reproduction of any data requires permission of LMC Automotive.
For more information or inquiries of forecast data, please contact LMC Automotive.

 

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