Daihatsu to Raise Indonesia Minicar Production to as Many as 400,000 Units

Bloomberg, By Anna Mukai and Yuki Hagiwara - Jan 19, 2011

Daihatsu Motor Co., Japan’s biggest minicar maker, will boost production in Indonesia to as much as 400,000 vehicles this year as the Toyota Motor Corp. unit seeks to increase sales in the Southeast Asian nation.

Indonesian auto demand will continue to expand and it’s necessary for Daihatsu to increase capital spending there if it wants to raise production further, President Koichi Ina said in an interview.

The company, based in Osaka, Japan, aims to increase sales in Indonesia 25 percent to 145,000 vehicles in 2011 from 115,000 last year. Its factory there, which also exports to the Middle East and Africa, will raise annual output to 330,000 units in May from the current 280,000 and could further boost production to a yearly rate of 400,000 vehicles, he said.

Japanese automakers are adding capacity in the region as sales growth outpaces the mature markets of the U.S, Europe and their home market, while the strong yen and lower labor costs make local production attractive. Auto sales in Indonesia are expected to rise 16 percent to 710,000 vehicles this year from 610,000 in 2010, according to IHS Automotive.

Daihatsu, which said last week it would withdraw from Europe in 2013 because the yen’s strength makes its exports uncompetitive, expects Japan sales to fall 4.2 percent to 1.65 million vehicles this fiscal year, Ina said.

Cutting Costs

To boost earnings, the company, 51 percent owned by Toyota, will focus on cutting costs and raising sales in Japan, Indonesia and Malaysia, Ina, 62, said in the Jan. 14 interview at the company’s headquarters.

“For now, we are not looking at entering markets elsewhere,” he said.

Daihatsu rose 1.6 percent to 1,312 yen yesterday in Tokyo trading. The stock has gained 5.3 percent in 2011.

The yen rose against all major currencies in 2010 and reached a 15-year high of 80.22 yen against the dollar in November.

In Japan, Daihatsu will introduce the e:S minicar in August with a price of less than 1 million yen ($12,160) and a fuel economy rating of 30 kilometers per liter (70 miles per gallon) under the Japanese test system.

The carmaker also plans to begin supplying Toyota with minicars in the second half of this year. Production will be limited to 60,000 units annually “no matter how much the market may expand,” Ina said.

Toyota doesn’t make its own minicars, which are limited to engines with capacities of 660cc or smaller and account for about 33 percent of auto sales in Japan, according to data from the Japan Automobile Dealers Association and the Japan Mini Vehicles Association.

Separately, Daihatsu plans to sell a hybrid car using technology from Toyota and it may also receive electric-vehicle components from its parent, Ina said. Daihatsu will decide the type of hybrid it will sell this year, Ina said.

To contact the reporter on this story: Anna Mukai in Tokyo at amukai1@bloomberg.net; Yuki Hagiwara in Tokyo at yhagiwara1@bloomberg.net