As Daihatsu firmly established itself as Toyota's small car specialist brand, compact cars were the biggest vehicles marketed by the company. When replacing the long-running Charmant, the company decided to try a unique approach at the segment, with the intention to capitalize on the preferences for sedans, while at the same time offering the flexibility and convenience of a 5-door body. Resulting from such concept, the Applause was presented at the 1989 Geneva Motor Show.
In the first year in the market, Applause's reputation was tarnished by widely publicized incidents of gasoline spurting under excessive air pressure while refuelling, which could lead to very hazardous accidents. Daihatsu fixed the problem in the 1990 model, named Applause Theta, to highlight the improvement.
In 1992, the Applause was mildly facelifted, with a subtle alteration of the front and rear fascias and slight increase in length. The "Theta" designation was dropped. The carburetor engine was not available anymore. The 1994 saw the cancellation of the AWD version, rear fascia upgrade and slight grille alteration.