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India strategy to take yrs: Toyota
Reuters
Toyota City, Japan, March 13, 2006
First Published: 16:17 IST(13/3/2006)
Last Updated: 12:11 IST(14/3/2006)

Toyota Motor Corp is years away from mapping out concrete plans to grow in India, a top official said, dashing speculation that a strategic decision on how to attack emerging markets is around the corner.

The world's second-biggest auto maker is racing ahead in the United States and other developed countries but is a laggard in many small but promising markets such as China and India due to its lack of ultra-cheap, no-frills cars.

Anticipating Toyota's next move in India, Japanese newspapers have been rife with reports, ranging from plans to co-develop a compact car with subsidiary Daihatsu Motor Co to going it alone with a new, low-cost car.

Akira Okabe, senior managing director in charge of Toyota's Asia, Oceania and Middle East operations, said the road is wide open, and its growth plans in India are linked directly to its strategy for all the BRIC markets -- Brazil, Russia, India and China. They are grouped together due to their growth potential.

"We can't plan with just the Indian market in mind," Okabe said at the auto maker's headquarters in Toyota City. "We're now entering the stage of detailing how to proceed."

Okabe said it would be at least two or three years before India had its third car to follow the locally produced Corolla sedan and Innova minivan.

Echoing President Katsuaki Watanabe's remarks last month that Toyota was considering a low-cost car aimed at emerging markets, Okabe said Toyota needed to lower prices to achieve bigger sales.

"India's core market is in the entry level of cars costing $6,000 to $8,000," he said. "It's difficult to make profits in this segment without economies of scale, so it would be ideal if we could commonise our products."

One way to do that would be to develop and manufacture cars jointly with minivehicle maker Daihatsu, whose main domestic rival Suzuki Motor Corp dominates the Indian market through unit Maruti Udyog Ltd, Okabe said.

Toyota and Daihatsu already have a similar arrangement in Indonesia, where the shared-platform Toyota Avanza and Daihatsu Xenia models are sold separately through their respective channels, with slightly varied specifications.

Okabe conceded the most efficient option would be to channel the group's technology, manufacturing and marketing resources for one common product.

But Daihatsu, which has yet to enter India, has said it wants to cultivate its own brand, presenting a potential conflict of interest with Toyota's desire to achieve maximum efficiency to compete with market leaders Maruti and Hyundai Motor.

Toyota is caught between a rock and a hard place, Okabe said, because it knows it needs a cheap car in India's most popular Class-A segment, but wants to maintain safety and other quality levels that prevent it from doing so easily.

"At least based on (emerging market) regulations, Toyota's cars are considered unnecessarily safe," he said.

"We have a global standard for safety so our costs are inevitably higher than we can get away with. Bridging this gap is our biggest challenge."

Toyota also needs to figure out where consumer demand is headed before taking the plunge, Okabe said.

"We don't know where the market is going, he said, noting that Suzuki and others were shifting upmarket to bigger models within the compact segment.

"But wherever that is, we hope to nail it and prepare for a real expansion around 2010."

Okabe said Toyota planned to double the number of its Indian showrooms to around 100 by 2010, when it wants to own 10 percent of the market -- equivalent to sales of anywhere between 200,000 and 300,000 units, depending on how fast demand grows.

Toyota has a long way to go.

Last year, its sales fell 15 per cent to 40,700 units in a market that grew 7 per cent, for a market share of 2.8 per cent, although Okabe expects a rebound to 48,000 units this year.


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