Toyota Motor placed such importance on the new Indian-built Etios compact that it was the only new car the company did not delay amid the global financial crisis.
President Akio Toyoda needs it to escape a sales ranking of seventh in Asia’s second-fastest growing major economy, the Korea Herald said.
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“Toyota has been very slow in getting its act together in India,” Darius Lam, a Bangkok-based analyst at JD Power & Associates said. “It’s hard to overstate the importance of Etios to Toyota’s future success in India.”
Toyoda launched the car this week in Bangalore, the first time he’s attended an overseas car presentation as chief executive. Toyota, with market share of 2.8% in India during the first 10 months of 2010, needs to win customers from market leader Maruti Suzuki India, Hyundai and General Motors as it seeks 10% of the market in five to seven years.
“India is a tough market to break through for a late comer like Toyota,” said Yoshihiro Okumura at Chiba-Gin Asset Management in Tokyo. “The critical strategy from here is how it plans to boost sales and set up dealers.”
The Etios will be Toyota’s cheapest offering in India. Sold as a small sedan, with a hatchback to follow in March, and built at a plant in Bidadi, near Bangalore, the Etios will later be offered in China, Brazil and Thailand.
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By GlobalData“This is a good milestone for Toyota in India,” said Ashvin Chotai, London-based managing director of Intelligence Automotive Asia, an industry consultant. “The segment that the Etios hatch is being targeted at is seeing a lot of competition from all foreign players.”
Toyota sold 62,000 cars in India to the end of October, compared with Maruti Suzuki’s 874,000 deliveries and Hyundai’s 299,000 vehicles. Maruti Suzuki controls 39% of India’s light vehicle market, while Hyundai ranks third with 13%, according to JD Power.
The Etios may also help the automaker narrow a sales gap with GM and Volkswagen in China, the world’s biggest auto market.
Sales of the Toyota brand in China grew 17% to 644,000 this year to the end of October, compared with a 36% gain to 1.98m units for market leader General Motors. Volkswagen delivered 1.65m vehicles in the period.
Toyota hasn’t yet announced a date for the Etios introduction in China. Its cheapest model in China is currently the Vios [sedan version of the Yaris] which is 23% more expensive than BYD’s F3 compact. The F3 is the country’s most popular car, priced at CNY70,800 (US$10,620).
Toyota designed the Etios specifically for emerging market customers, betting the less expensive model can win new buyers without tarnishing its reputation for reliable cars. Until now, the Innova minivan was Toyota’s cheapest vehicle in India, starting at INR826,433 in Mumbai. Neither model comes with airbags as standard.
The automaker is lowering costs for its new model, whose name is derived from the Greek word “ethos,” by increasing the amount of parts purchased in India. Engine and transmission production will also start in India in 2012, according to Toyota executive vice president Yukitoshi Funo.
“Bringing procurement cost to a very competitive level is a do or die challenge for our procurement and production teams,” Funo said in an interview in October.
While cheaper than other Toyotas, the Etios arrives as Nissan Motor plans to sell a $3,000 car in India in 2012 supplied by Bajaj Auto, the country’s second-largest motorcycle maker. Tata Motor’s Nano, the world’s cheapest car, is even cheaper at INR131,331.
The success of Indian-built Etios cars may depend on exports, following a similar path to Nissan’s Chennai-built Micra, said Chotai.
“Nissan has been able to ramp up production mainly with exports,” Chotai said. “A lot depends on a healthy balance between exports and local sales.”
Even so, Toyota may benefit from adding a car that competes with the best-selling models in the nation.
“The company has spent the past five years making sure it delivers exactly what Indian car buyers expect,” JD Power’s Lam said. “The Etios finally allows Toyota to compete in the heart of the Indian light vehicle market.”
