UPDATE 2-Fuji Heavy, Daihatsu to share cars in Japan -paper

(Updates with analyst, company comments)

TOKYO, Oct 30 (Reuters) - Japan's Fuji Heavy Industries Ltd (7270.T: Quote, Profile, Research, Stock Buzz), the maker of Subaru brand cars, and Daihatsu Motor Co (7262.T: Quote, Profile, Research, Stock Buzz) will supply each other passenger cars in the domestic market, the Nikkei business daily reported on Tuesday.

Fuji Heavy, held 8.7 percent by Toyota Motor Corp (7203.T: Quote, Profile, Research, Stock Buzz), has said that it wants a subcompact car to compete more effectively globally, and that limited resources meant it may tap resources within the Toyota group for engines, vehicle platform or joint development.

In the tie-up being discussed, Daihatsu, Toyota's minivehicle unit, would supply 5,000 to 6,000 subcompacts with 1- to 1.5-litre engines a year to Fuji Heavy starting as early as mid-2008, the Nikkei said without citing sources.

Daihatsu will also supply 660cc minivehicles to Fuji Heavy, which will phase out its production of those cars, the paper said. In return, Daihatsu will procure 2-liter-engine passenger cars from Fuji Heavy, it said.

Fuji Heavy, Toyota and Daihatsu said nothing had been decided, while noting they have an ongoing discussion to explore various areas of cooperation.

Fuji Heavy and Daihatsu already have an agreement under which Daihatsu supplies Subaru with about 6,000 compact cars a year in Europe. Sale of the car, based on Daihatsu's Boon model and called Subaru Justy, began last month.

Shares of Fuji Heavy rose 1.4 percent to 579 yen in early afternoon trade, while Daihatsu lost 1.3 percent to 1,174 yen. The transport sector subindex lost 0.5 percent.

JPMorgan Securities analyst Takaki Nakanishi said cooperation along the lines of the report would make sense in the long term, but warned against overreacting.