Toyota, Daihatsu Form Minicar Partnership

TOKYO (AP) -- Toyota Motor Corp., the world's biggest automaker, is getting into the minicar market.

The company said Tuesday that it would expand its product line to include minivehicles made by subsidiary Daihatsu Motor Co. starting in stages from autumn 2011 in Japan.

Under the agreement, Daihatsu will produce three models for Toyota, which will sell them through its domestic "Corolla and "Netz" dealerships. The companies said they expect annual sales of about 60,000 minivehicles once all three models hit showrooms.

"The minivehicle market has been expanding recently, and more of our customers have been asking for them," said Toyota Executive Vice President Yoichiro Ichimaru at a joint press conference.

Such deals are called an OEM, or "original equipment manufacture," agreement in the auto industry. That means one automaker -- Daihatsu in this case -- supplies products to another company to sell under its own brand.

Mini vehicles are defined by specifications unique to Japan: maximum length of 3.4 meters (11.15 feet), width of 1.48 meters (4.86 feet), height of 2 meters (6.56 feet) and engine displacement of less than 660 cc.

The category is popular in Japan for its money-saving potential, including lower fuel costs and taxes. They currently comprise about a third of Japan's annual vehicle sales.

Automakers have sold 1.22 million mini vehicles in Japan this year through August, a rise of about 8 percent, according to the Japan Mini Vehicles Association. Daihatsu, which is 51 percent owned by Toyota, holds top share of Japan's competitive minivehicle market.

Daihatsu shares surged in trading Tuesday ahead of the announcement. The issue rose 3.2 percent on the Tokyo Stock Exchange compared with benchmark Nikkei 225 index's 1.1 percent decline. Toyota fell 0.7 percent.

The companies also said they will discuss other ways to collaborate in Japan using Toyota's experience in green technologies, including hybrid and electric vehicle know-how. Products will be decided by the end of 2011, they said.