TOKYO/MUMBAI (Bloomberg) -- Toyota Motor Corp. has debuted its Indian-built Etios sedan, a car it hopes will help it escape a sales ranking of seventh in Asia's second-fastest growing major economy. Toyota President Akio Toyoda personally introduced the car in Bangalore, the first time he's attended an overseas car presentation as CEO. Priced from 496,000 rupees ($10,900), it is Toyota's cheapest offering in India.
Toyota, with a market share of 2.8 percent in India during the first 10 months of 2010, badly needs to win customers from market leaders Maruti Suzuki India Ltd., Hyundai Motor Co. and General Motors Co. as it seeks 10 percent of the market in five to seven years.
“Toyota has been very slow in getting its act together in India,” said Darius Lam, a Bangkok-based analyst at researcher J.D. Power & Associates. “It's hard to overstate the importance of Etios to Toyota's future success in India.”
Toyota has placed such importance on the Etios that it was the only new car the company didn't delay amid the global financial crisis. The model, which competes with Maruti Suzuki's Swift and Hyundai's i20 subcompacts, goes on sale today in the world's second-most populous nation.
“We are aiming for a full-scale presence in India,” Toyoda told reporters today. “With the Etios, we are able to serve an even broader range of customers.”
Sold as a small sedan, with a hatchback to follow in April, and built at a plant in Bidadi, near Bangalore, variations on the Etios will later be added in China, Brazil and Thailand.
“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 aims to sell 70,000 units of the Etios in the first year, the company said today. It sold 62,000 vehicles in India this year through October, compared with Maruti Suzuki's 874,000 deliveries and Hyundai's 299,000 vehicles. Maruti Suzuki controls 39 percent of India's light-vehicle market, while Hyundai ranks third with 13 percent, according to J.D. Power.
The Etios may also help the Japanese automaker narrow a sales gap with GM and Volkswagen AG in China, the world's biggest auto market. Sales of the Toyota brand in China grew 17 percent to 644,000 cars this year through October, compared with a 36 percent gain to 1.98 million units for market leader General Motors Co. VW delivered 1.65 million vehicles in the period.
The Japanese company hasn't yet announced a date for the Etios introduction in China. Toyota's cheapest model in China is currently the Vios, which is 23 percent more expensive than BYD Co.'s F3 compact. The F3 is the country's most popular car, priced at 70,800 yuan ($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 826,433 rupees in Mumbai. Neither model comes with airbags as standard.
The automaker is lowering costs for its new model by increasing the amount of parts purchased in India, with localization reaching 90 percent as engine and transmission production starts there in 2012.
‘Do or die'
“Bringing procurement cost to a very competitive level is a do-or-die challenge for our procurement and production teams,” Toyota Executive Vice President Yukitoshi Funo said in an interview in October.
While cheaper than other Toyotas, the Etios arrives as Nissan Motor Co. plans to sell a $3,000 car in India in 2012 supplied by Bajaj Auto Ltd., the country's second-largest motorcycle maker. Tata Motor Ltd.'s Nano, the world's cheapest car, is even less expensive, priced at 131,331 rupees. The success of India-built Etios cars may depend on exports, following a similar path to Nissan's Chennai-built Micra, Chotai said.
“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,” said J.D. Power's Lam. “The Etios finally allows Toyota to compete in the heart of the Indian light vehicle market.”