Toyota Motor (TM) has teamed up with its subsidiary Daihatsu to develop a compact car for emerging markets. The car, which would be priced under ¥1 million ($11,000) will be offered for sale in India, Brazil, China and other markets in the first half of the next decade.

The compact would be marketed under the Toyota brand. However, Daihatsu in Indonesia would manufacture it. The development of the compact is in line with the business model incorporated by Toyota President Akio Toyoda to build products for individual geographical segments instead of offering the same lineup across the world.

The Japanese auto major also plans to manufacture a compact entry-level family car at its own facilities. The compact, powered by a roughly 1-liter engine, is scheduled to be manufactured in India during 2011.

Toyota has been battered financially by the economic crisis. The company posted its first annual loss (¥437 billion or $4.4 billion) since 1950 for the fiscal year ended March 2009. Further, management has recently projected net loss to worsen to ¥550 billion ($5.5 billion) for the fiscal year ending March 2010.

However, the recently ended Cash for Clunkers program strengthened the demand for Toyota’s fuel-efficient vehicles in the U.S. The program, launched by the U.S. Government in late July, allowed consumers to trade in their old gas-guzzling cars and trucks with a mileage of 18 miles per gallon or less for a value of up to $3,500–$4,500.

Toyota ruled the roost in the Clunkers program, boasting 3 models among the top 10 buys under the program. These are the Toyota Corolla (ranked first), Toyota Camry (ranked third) and Toyota Prius (ranked seventh). In terms of market share, Toyota led with 19.4% of all Clunkers sales. We continue to recommend the shares of Toyota as Neutral.
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