The History of Daihatsu

Brand

The Kei Car King

In the crowded landscape of the global automotive industry, few manufacturers have carved out a niche as distinct—and in some markets, as beloved—as Daihatsu Motor Co., Ltd. While often overshadowed in the United States by its corporate parent, Toyota, Daihatsu holds the title of Japan’s oldest car manufacturer. Known for its uncompromising focus on compact engineering, front-wheel-drive layouts, and the ubiquitous Kei car, Daihatsu’s history is a fascinating tale of survival, innovation, and corporate maneuvering.

The Founding: A Century of Engines

Daihatsu’s roots stretch back further than most automotive giants. The company was founded in March 1907 in the city of Ikeda, Osaka Prefecture, by three brothers: Kawashima Kiichiro, Kawashima Hitoshi, and Kawashima Chikuhei.

Unlike many early automakers who began by building whole vehicles, the brothers established the Daihatsu Iron Works, a company that specialized in stationary internal combustion engines. For decades, they manufactured engines for various industries. It wasn’t until 1930 that the company began applying its engineering prowess to transportation, producing the “HB” engine for three-wheeled vehicles (a common precursor to trucks in Japan).

By 1936, the company, then known as Daihatsu Motors, began mass-producing four-wheeled vehicles, adhering to the Japanese government’s “Small Motor Vehicle Act.” However, their true automotive identity began to crystallize during World War II, when they focused heavily on military trucks and three-wheeled vehicles.

Post-War Challenges and the Bubble Economy

Following the devastation of World War II, Daihatsu shifted its focus to civilian needs. In 1951, the company released the Daihatsu Midget, a tiny, three-wheeled truck that became a symbol of post-war reconstruction. It was utilitarian, cheap, and incredibly compact—hallmarks of the brand that would persist for decades.

However, the company faced a significant hardship in the late 1940s. Japan’s economy was in ruins, and raw materials were scarce. Daihatsu struggled to transition from military production to consumer goods. The company survived through sheer adaptation, diversifying into small-displacement engines and three-wheelers, which required less steel than four-wheelers.

The 1960s brought a boom in the Japanese economy. Daihatsu, sensing the need for a true passenger car, launched the Daihatsu Compagno in 1960. This was the company’s first unibody passenger car. The Compagno was unique; it featured a distinctively European design (thanks to Italian stylist Giovanni Michelotti) and a front-engine, rear-wheel-drive layout. While mechanically conventional for the time, it showcased Daihatsu’s ability to produce stylish, road-going vehicles.

The Toyota Era: Acquisition and Integration

A pivotal moment in Daihatsu’s history occurred in 1967. At this time, Daihatsu was a relatively small player compared to giants like Nissan and Honda. Seeking capital and a distribution network to expand globally, Daihatsu entered a business alliance with Toyota Motor Corporation.

This was not merely a partnership; it was a slow-motion acquisition. Toyota began buying shares of Daihatsu stock, and by 1998, Toyota had acquired over 50% of the company, officially making Daihatsu a subsidiary. Today, Toyota owns 100% of Daihatsu’s voting stock.

The Merger/Acquisition Details:

  • Acquirer: Toyota Motor Corporation (Founded 1937).
  • Target: Daihatsu Motor Co., Ltd.
  • Timeline: The alliance began in 1967; the acquisition became controlling in the 1990s (specifically 1998), and fully consolidated by the 2010s.

Under Toyota’s umbrella, Daihatsu was tasked with a specific role: developing compact cars. Toyota, known for its mid-size Camry and Land Cruiser, lacked a true small-car DNA. Daihatsu provided that engineering expertise.

Engineering Philosophy: What Makes Daihatsu Different?

If you were to strip a Daihatsu down to its chassis, you would find a philosophy distinct from American or European manufacturers. Daihatsu engineers are renowned for two specific traits:

  1. Kei Car Expertise: Daihatsu is the undisputed king of the Kei car class in Japan. These are vehicles with engines smaller than 660cc and dimensions strictly regulated by the Japanese government for tax breaks. Daihatsu squeezes incredible amounts of interior space and utility into these tiny footprints.
  2. Front-Engine, Front-Wheel Drive (FF): While American cars were largely rear-wheel drive until the 1980s, Daihatsu embraced the FF layout early (with the 1965 Daihatsu Fellow). This configuration maximizes cabin space and traction, defining the layout of almost every compact car today.
  3. TrueCab Engineering: Daihatsu pioneered the “TrueCab” concept in their trucks—moving the cabin forward to create a flat loading deck, distinct from the “Dogleg” design of competitors.

Hardships and Scandals: The 2023 Data Fabrication Crisis

Despite their engineering prowess, Daihatsu has faced severe crises. The most damaging occurred recently, in 2023.

For decades, Daihatsu was synonymous with reliability and safety certification. However, it was revealed that the company had been engaging in systematic data fabrication for safety certifications. The issue began with reports of fraudulent crash tests on the Daihatsu Rocky (sold internationally as the Toyota Raize), where airbag deployment times were artificially manipulated to pass tests.

As investigations widened, the scandal expanded to include 64 models (including those branded as Mazda, Subaru, and Toyota) and spanned decades of production.

  • The Issue: The company falsified pedestrian protection test data and certification documents.
  • The Resolution: In May 2024, after a catastrophic loss of trust, Daihatsu announced a fundamental restructuring. They ceased all overseas shipments (excluding Japan) to prioritize rectifying the scandal. The company’s president, Soichiro Michi, resigned, and the company is currently in a multi-year process of rebuilding its compliance culture and recertifying its models.

Racing and Marketing

While not as dominant as Ferrari or McLaren in global racing, Daihatsu has a respectable motorsport heritage, primarily in Japan’s domestic touring car championships.

Rallying: Daihatsu achieved international fame in 1994 when Finnish driver Timo Salonen drove a Daihatsu Charade GTTi to victory in the Rally of Indonesia (part of the World Rally Championship). The Charade, with its turbocharged 1.0-liter engine, proved that lightweight Daihatsu engineering could compete against much larger machinery.

Marketing: Daihatsu’s marketing has often relied on charm and utility. In the 1980s and 1990s, their U.S. slogan was “We Handle It,” emphasizing their reliability. In Japan, their most famous recent marketing campaign involved the “Daihatsu Tanto Fun Cross” and “Daihatsu Copen“, promoting a lifestyle of customization and fun, using vibrant colors and off-road aesthetics on city cars.

Factory Operations

Daihatsu’s manufacturing is a model of efficiency, often referred to as “Daihatsu Production System.” It emphasizes:

  • Kaizen (Continuous Improvement): Workers are empowered to stop the assembly line if a defect is spotted (similar to Toyota’s Andon cord).
  • Small-Scale Optimization: Because they build compact cars, their assembly lines are often tighter and more precise than those building full-size trucks.
  • Key Facilities: Major plants are located in Ikeda, Nakatsu, and Oita in Japan. In 2022, Daihatsu announced the construction of a new plant in Indonesia (the Karawang Plant) to focus on Kei cars and electrification for the Southeast Asian market.

The U.S. Experience: A Brief Flirtation

From an American perspective, Daihatsu is a ghost brand—a curious footnote in automotive history. Their time in the U.S. market was relatively short and niche.

Daihatsu officially entered the U.S. market in 1988. At the time, the Japanese “Yen” was incredibly strong against the dollar, making Japanese cars expensive. Daihatsu attempted to compete by offering quirky, affordable vehicles.

U.S. Lineup:

Reception: The reception was mixed. The cars were praised for reliability and fuel economy but criticized for feeling “cheap” and underpowered by American standards. The styling was often seen as too odd for the American conservative taste. Furthermore, Daihatsu lacked the dealer network and marketing budget of Honda or Toyota.

By the early 1990s, the “bubble economy” in Japan burst, and the Yen stabilized. The cost advantage disappeared, and Daihatsu struggled to justify the expense of maintaining a U.S. presence.

The Exit: Daihatsu officially ceased U.S. sales in 1992. Toyota rebranded some of Daihatsu’s platforms (like the Daihatsu Rocky becoming the Toyota RAV4) and sold them under the Toyota nameplate, which was more trusted by American consumers.

Vehicle Production: First, Last, and Most Popular

First Vehicle Produced (as a Company): While they produced the three-wheeled “HB” engine vehicle in 1930, the first four-wheeled vehicle produced by the company was the Daihatsu Bee in 1951. However, the first mass-market automobile that established their reputation was the Daihatsu Compagno in 1960.

The Latest Vehicle: As of 2024, amidst the certification scandal, Daihatsu’s latest major release is the all-electric Daihatsu Mebius, a compact minivan designed for the Japanese market (launched in 2023). It utilizes a design co-developed with Subaru.

The Most Popular Vehicle: Daihatsu Charade (Global) / Daihatsu Hijet (Japan) Globally, the Daihatsu Charade (produced 1977–2000) is the most recognizable nameplate. It was a subcompact car that offered spirited performance (especially in GTi trim) and exceptional fuel economy. It competed directly with the Honda Civic and Toyota Corolla.

  • Why it was popular: It offered the reliability of a Toyota in a smaller, more efficient package. The turbocharged versions were beloved by enthusiasts for their “giant killer” handling.

However, in Japan, the Daihatsu Hijet (a Kei truck / van) is the undisputed volume leader. Produced since 1960, it is the quintessential Japanese utility vehicle.

Sales Figures:

  • U.S. Sales (Peak Year): In 1990, Daihatsu sold approximately 20,000 units in the United States (total brand volume).
  • Global Sales (Current): Daihatsu currently sells approximately 800,000 to 900,000 vehicles annually, the vast majority of which are in Japan and Southeast Asia.

Current Status and Outlook

Daihatsu is still in business, but it is currently navigating a crisis. As of late 2024, the company has suspended all exports outside of Japan to focus on regaining certification compliance.

Outlook: Despite the scandal, Toyota has publicly stated it has no intention of dissolving Daihatsu. The brand remains too critical to Toyota’s strategy, particularly in emerging markets like Indonesia and Thailand, where Daihatsu serves as the primary engineering base for compact Toyota models.

The future of Daihatsu will likely see a pivot toward electrification. Daihatsu is developing the “New Global Architecture (DNGA)”, a platform designed to modernize their Kei cars and small vehicles with advanced safety features and electrified powertrains. For now, the “Kei Car King” remains on the throne, but it is walking a tightrope, relying on its century of engineering legacy to navigate its most turbulent chapter yet.

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