Suzuki Motor is relinquishing its ranking as the world's biggest maker of minicars, the pool-table-size autos that crowd Japanese streets, but beating No. 2 Daihatsu Motor in the stock market.
Suzuki will make 5.1 percent fewer minicars in Japan this fiscal year to focus on selling more profitable compact vehicles in Asia and Europe. Daihatsu, a unit of Toyota Motor, is building a new factory to expand minicar sales.
So far, investors prefer the strategy of Suzuki, whose shares have surged 48 percent this year to become the fifth-best performer in the Nikkei 225 stock average. Daihatsu stock is down 12 percent.
Demand for vehicles in India, China and Eastern Europe will rise faster than in Japan, according to Credit Suisse Securities Japan. Domestic sales have slumped for the past six months.
"I like Suzuki because it is an aggressive company," said Ichiro Takamatsu, chief investment officer at Alphex Investments in Tokyo. "Investors are looking for a chance to buy companies with quality, and Suzuki is one of them."
Japan is the only country with a legally defined minicar category, and the only country where making them is profitable. The Smart minicar, made by DaimlerChrysler, the world's fifth-largest automaker, has never made money.
Shares of Suzuki rose 0.6 percent to ¥3,210 on the Tokyo Stock Exchange on Thursday. Daihatsu shares declined 0.3 percent to ¥1,121.
Japanese minicar sales may exceed two million units this year, a record, as drivers strive to cut spending on fuel and benefit from lower taxes. The growth has enticed rivals including Nissan Motor and Mitsubishi Motor to bring out new minicar models, stealing market share from Suzuki and Daihatsu.
Suzuki, based in Hamamatsu City, southwest of Tokyo, has responded by trimming minicar production in Japan by 60,000 units over two years.
Suzuki's overall domestic production will rise 2.5 percent to 1.16 million vehicles in the year ending March 31. Its overseas sales jumped 9.9 percent to 588,000 units in the five months through August. Daihatsu sales abroad were little changed at 65,354 units. The Osaka- based company plans to raise domestic output 20 percent to 1.09 million units in fiscal 2007.
"I chose sales and profit over market share in Japan," Suzuki's chairman, Osamu Suzuki, said at a press conference in August. The company announced a plan to spend ¥60 billion on a new factory to start production in 2008. The factory, to be located in Shizuoka prefecture, will not build minicars at all.
Investors are willing to pay more for Suzuki, whose shares trade at 25 times earnings. Daihatsu's price-to- earnings ratio is 14.2, slightly less than Toyota's 15.8.
"Suzuki's strategy is driving the share price higher," said Hitoshi Yamamoto, president of Commerz International Capital Management in Tokyo.
Suzuki, also the world's third- biggest motorcycle maker, was faster than Daihatsu in expanding abroad. It was the first Japanese automaker to build vehicles in India in 1983 and owns 54 percent of Maruti Udyog, a New Delhi company that makes half the country's cars.
Suzuki will make 5.1 percent fewer minicars in Japan this fiscal year to focus on selling more profitable compact vehicles in Asia and Europe. Daihatsu, a unit of Toyota Motor, is building a new factory to expand minicar sales.
So far, investors prefer the strategy of Suzuki, whose shares have surged 48 percent this year to become the fifth-best performer in the Nikkei 225 stock average. Daihatsu stock is down 12 percent.
Demand for vehicles in India, China and Eastern Europe will rise faster than in Japan, according to Credit Suisse Securities Japan. Domestic sales have slumped for the past six months.
"I like Suzuki because it is an aggressive company," said Ichiro Takamatsu, chief investment officer at Alphex Investments in Tokyo. "Investors are looking for a chance to buy companies with quality, and Suzuki is one of them."
Japan is the only country with a legally defined minicar category, and the only country where making them is profitable. The Smart minicar, made by DaimlerChrysler, the world's fifth-largest automaker, has never made money.
Shares of Suzuki rose 0.6 percent to ¥3,210 on the Tokyo Stock Exchange on Thursday. Daihatsu shares declined 0.3 percent to ¥1,121.
Japanese minicar sales may exceed two million units this year, a record, as drivers strive to cut spending on fuel and benefit from lower taxes. The growth has enticed rivals including Nissan Motor and Mitsubishi Motor to bring out new minicar models, stealing market share from Suzuki and Daihatsu.
Suzuki, based in Hamamatsu City, southwest of Tokyo, has responded by trimming minicar production in Japan by 60,000 units over two years.
Suzuki's overall domestic production will rise 2.5 percent to 1.16 million vehicles in the year ending March 31. Its overseas sales jumped 9.9 percent to 588,000 units in the five months through August. Daihatsu sales abroad were little changed at 65,354 units. The Osaka- based company plans to raise domestic output 20 percent to 1.09 million units in fiscal 2007.
"I chose sales and profit over market share in Japan," Suzuki's chairman, Osamu Suzuki, said at a press conference in August. The company announced a plan to spend ¥60 billion on a new factory to start production in 2008. The factory, to be located in Shizuoka prefecture, will not build minicars at all.
Investors are willing to pay more for Suzuki, whose shares trade at 25 times earnings. Daihatsu's price-to- earnings ratio is 14.2, slightly less than Toyota's 15.8.
"Suzuki's strategy is driving the share price higher," said Hitoshi Yamamoto, president of Commerz International Capital Management in Tokyo.
Suzuki, also the world's third- biggest motorcycle maker, was faster than Daihatsu in expanding abroad. It was the first Japanese automaker to build vehicles in India in 1983 and owns 54 percent of Maruti Udyog, a New Delhi company that makes half the country's cars.
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