The world’s largest carmaker, Toyota Motor, is finally getting ready to enter the Indian small-car market and challenge the dominance of Maruti Suzuki and Hyundai Motor in their bread-and-butter segment. The Japanese automaker and its unit specialising in small cars, Daihatsu Motor, are expected to drive in a new range of vehicles to India starting 2020-2021.
A few days ago, Toyota and its fully owned Daihatsu unit announced plans to establish an internal company that will be responsible for compact vehicles for emerging markets, from product planning to production preparation. India is an integral part of this move. The structure of this new internal company is likely to be formed by January, 2017.
The groundwork has already been done through various studies commissioned over the years, said people in the know of the plans. The Toyota-Daihatsu combine will target the A and B segments, where vehicles are typically priced below Rs 10 lakh. This segment, where Toyota currently has only a limited presence here with the Etios range, is the mainstay for Maruti and Hyundai Motor India.
The branding for the products is yet to be defined. The new cars under the venture may be branded Toyota or Daihatsu, or it could be an all-new brand in line with how Toyota introduced a ‘Scion’ brand in North America in 2003 — the brand was discontinued this year.
Through the proposed internal organisation, the objective is to develop and launch competitive compact vehicles in emerging markets based on Daihatsu’s approach to manufacturing affordable, high-quality products. While the small car champion will take the lead responsibility in this new initiative, in India, it will seek to gain from the parent’s understanding of the market.
Vikram Kirloskar, vice chairman of Toyota Kirloskar, the Indian unit of Toyota, told ET that the initial target of the new company would be Asian countries and that joint decisions would be made to enable the effective use of both companies’ existing bases of operation.
“We are happy to note that India is among the countries being considered as the responsibility of Daihatsu as the Indian market has strong need for compact vehicles in the B Segment and A Segment which is Daihatsu’s strong point. The priority would be to strengthen operations in each country by first enhancing the collective capabilities of the Toyota Group,” he said.
More details on the initiative will be known by January of 2017, when the formal structure will be defined, Kirloskar said, while declining to comment on products or timelines.
A person in the know of the plans said the vehicles would come around 2020 and conform to the BS-VI emission guidelines that would come into effect that year.
It makes sense for Toyota to launch compact cars in India around 2020, by when the market would grow more than 70% from now and the buying power of the middle class would be much higher, said Gaurav Vangaal, senior analyst for forecasting at IHS Markit Automotive. “But then, countering the already strengthening Maruti and Hyundai won’t be an easy task, though the cars will be from Toyota,” he added.
Daihatsu will be responsible for the development, procurement and production preparation for compact vehicles for emerging markets based on “DNGA”, a Daihatsu vehicle architecture now being defined, and Toyota will support these efforts by providing knowledge and resources. The business plans will be formulated jointly and, in India, the Toyota-Daihatsu combine is likely to use Toyota’s existing facility on the outskirts of Bengaluru. It factory has an annual capacity to produce 3.1 lakh vehicles and is being underutilised.
Kirloskar said Toyota is learning about Daihatsu’s strengths, such as its work processes and approach to manufacturing at both its production and development workplaces. Daihatsu, on the other hand, is receiving various kinds of support related to the evolution of automobile manufacturing, such as information related to advanced technologies, starting with hybrids.
“We are hopeful that by sharing and unifying strategies for the future, mutual synergies will be steadily achieved and result would be seen in India as well,” he added.
Daihatsu has twice in the past attempted to enter the Indian market — first in late 2000 and then a few years later.
According a person in the know of Toyota’s plans, the sourcing executives of Daihatsu have already met vendors to discuss a few projects.
Another said future growth for the company would likely come from Asia. “The needs of these markets are different from the developed world; they can be catered only through Daihatsu’s small car,” he added.
Daihatsu will launch a new generation Agya or Ayla — a small car sold in Indonesia — by 2019 and it is the same car which is being explored for the Indian market, said year another person. “The company has also studied the possibility of launching the B segment SUV for India.”
