Honda will shift development of minicars to a new subsidiary to help free up engineers to develop more profitable cars. Honda’s bought Yachiyo Industry Co. and will use it to handle development, production, and purchasing for high-volume low-margin minicars. Honda’s own engineers will work on large cars and Acura-branded vehicles that have higher profit margins.

Japanese minicar sales may surpass 2 million this year, but Honda has found it difficult to compete on price compared to rival companies such as Suzuki and Diahatsu. With Nissan and Mitsubishi also joining the fold, competition is hotter than ever, making this deal necessary.