TOKYO – Daihatsu has decided that less can be more – or small can be big in terms of future market opportunities.

The auto maker has identified a new niche market in Japan and plans to tap into it with the Pico, a unique mini-mini-electric-car concept unveiled at the Tokyo Motor Show in December.

The tiny EV, powered by a 5-kWh lithium-ion battery, the same general-use battery Panasonic supplies to U.S.-based Tesla, has a 33-mile (50-km) range and runs at speeds up to 33 mph (50 km/h). The battery can be recharged in just two hours on household current.

The Pico weighs just 880 lbs. (400 kg) and fully enclosed can seat two people, one in the front and one in the back. By removing the rear seat, it can be converted to a delivery vehicle.

Prime targets are those who require something less than a conventional 0.66L mini car, truck or van, all common in Japan.

Prospective buyers include mothers with small children and seniors in both urban and rural Japan, as well as merchants offering parcel and fast-food delivery services.

“As Japan’s population continues to age, a growing number of people are finding it more difficult to maneuver around their crowded neighborhoods on foot and will find this type of vehicle convenient to shop or run errands,” says Naoto Kitagawa, Daihatsu senior managing executive officer in charge of market planning.

Pressure is increasing in Japan’s urban areas, where two-thirds of the nation’s population lives, to cut noise and emissions levels by replacing older gasoline-powered delivery vehicles with clean-running, battery-powered machines.

A senior engineer in Daihatsu’s product development group expects the Pico to receive Land, Infrastructure and Transport Ministry approval in two years. The auto maker eventually hopes 2-seater EVs will capture 10% of Japan’s minivehicle market.

Daihatsu is not looking to replace conventional 0.66L minis but to create a new segment by taking away business from 0.5L scooters, small motorcycles and motorized bicycles. Kitagawa believes the 2-seater Pico has a competitive edge over 3-seater EVs currently under development by Nissan, Honda and others.

The Pico is only 39 ins. (99 cm) wide, a third narrower than Nissan’s Pivo 3 and Honda’s Micro Commuter concepts, and can move easily along the narrow roads and skinny alleys still common in older residential areas of many Japanese cities.

Pricing is targeted at under ¥600,000 ($7,800), roughly 15% less than the standard 0.66L minivehicles that now account for nearly 35% of new-vehicle demand in Japan. In 2010, sales in the sector totaled 1.5 million units.

Daihatsu, the market leader in the domestic mini segment after surging past Suzuki (32%) five years ago, now controls a 35% share. However, the Osaka-based auto maker still ranks second in mini production, thanks to Suzuki’s supply arrangements with Mazda and Nissan.

That could change in the future, as Daihatsu now has two OEM customers of its own, Fuji Heavy Industries (maker of Subaru cars) and parent Toyota.

Kitagawa, who is pessimistic about the Japanese market overall, is bullish on minis, expecting demand to hold steady.

While it is still too soon to say whether 2-seater EVs will catch on and become an important new addition to the mini segment in Japan, it is noteworthy that several European auto makers, including Audi, BMW and Renault, are showing interest in the concept.

Suzuki also displayed an electric 2-seater, the Q-Concept, at the Tokyo show last month, although the Pico appears further along the development curve.

Unlike Suzuki, which now builds nearly two-thirds of its cars outside Japan, Daihatsu still is Japan-centered. However, it does have assembly operations in Malaysia and Indonesia, not bad launching pads if the Pico proves its worth in the Japanese market.

A handful of the world’s megacities are located in Southeast Asia, each facing the same pollution and congestion problems as Tokyo, Osaka and Nagoya.

Because Daihatsu now is responsible for the design, engineering and development of small cars for Toyota and both auto makers build cars for each other in Japan and Asia, it is not unrealistic to think the Pico, whether badged Daihatsu or Toyota, could get a warm welcome in overseas markets.