Toyota Motor Corp will buy 660cc minivehicles from unit Daihatsu Motor Co and sell them under its own brand in Japan, the Nikkei business daily reported on Tuesday.
The two companies said Daihatsu President Koichi Ina and Toyota Executive Vice President Yoichiro Ichimaru, who oversees Japanese operations, would hold a news conference at 1330 IST (0800 GMT) in Tokyo to brief on a new collaboration deal.
A Toyota spokeswoman declined to disclose further details or comment on the Nikkei report. News of the briefing pushed Daihatsu's shares up 3 per cent in late afternoon trade, while Toyota was down 0.5 per cent.
Daihatsu and its 51 per cent owner, Toyota, cooperate broadly, including sharing manufacturing facilities and vehicle platforms.
Minivehicles with engine displacements of 660cc are unique to Japan, where they make up about one-third of vehicle sales thanks to preferential tax treatment.
Their share of the Japanese market has declined in the past year as consumers take advantage of government incentives that favour regular cars, but automakers expect the longer-term trend to favour minivehicles.
Toyota's entry into this segment, which Honda Motor Co CEO Takanobu Ito has said could eventually account for half the Japanese market, promises to stiffen competition in the already low-margin business.
In the financial year to March 2010, Daihatsu had the top share of Japan's minivehicle market with 35.1 per cent, followed by Suzuki Motor Corp with 32.7 per cent. Honda, ranked third with 9.3 per cent, has said it aims to beef up its minivehicle operations to stem a sales decline in the shrinking Japanese market.
Daihatsu also supplies three 660cc models to Fuji Heavy Industries Ltd, maker of the Subaru brand and also partly owned by Toyota. Nissan Motor Co sells minivehicles made by Suzuki and Mitsubishi Motors Corp under an original equipment manufacturing (OEM) deal.
Toyota and Daihatsu will decide on model types and sales volumes later, the Nikkei said, without citing sources.