Global Economics

Toyota Reveals Pricing for New Indian Compact Car


Toyota Kirloskar, the Indian unit of the Japanese automaker, announces pricing details for its much-awaited compact car due out next year

Toyota Kirloskar Motor, the Indian subsidiary of the Japanese auto giant, has revealed the pricing segment for the compact car it plans to launch next year.

In an exclusive chat with ET, the company, which is the Indian venture of Toyota Motor, the world's biggest car manufacturer by volumes, also plans to jack up its production to 5,000 units a month by July, and double sales and servicing manpower by 2010.

"The compact car will be priced in the B+ category," said Sandeep Singh, deputy MD, revealing details of the much-awaited car for the first time. This category has cars, such as Maruti Swift, the Skoda Fabia and the Chevy UVA.

The pricing of these cars is between Rs 5 lakh and Rs 7 lakh. This means that the compact car will be priced between a Santro top-end variant and a Honda City entry variant. The model will be launched in both sedan and hatchback versions. Around 70,000 units of the so-called compact vehicle will be produced at its Rs 3,200-crore factory at Bidadi in Bangalore.

The compact car will have a localisation of 65% to start with, and will gradually be taken to 90% by 2011, said Shekar Viswanathan, deputy MD (Commercial). That would make it one of the few foreign models with the highest percentage of local components. The Innova, which sold 3,900 units in March, and the Corolla have a localisation of 65% and 45%, respectively.

"We are looking to have 75% local components for the Innova and around 50% for the Corolla by next year," said Mr. Viswanathan.

Higher localisation for the small car has made the company actively consider a new powertrain facility by the end of 2010. Still in the planning stages, the facility will be dedicated to producing engines and gearboxes for the compact car.

The company is looking at expanding dealer network from the current 82 to 150 by 2010-end, said Mr. Singh. "With the compact car, we want to be in semi-rural and rural towns," he said.

By the end of this year, the number of dealerships will be around 95. With the rise in dealerships will come new hires, which will double the sales and servicing teams from the existing 2,800 people. The company, which had cut production in the first quarter, saw a 20% shortfall in supply for its models in March.

This has led to a revision in sales targets, and now the company will be making 5,000 units from July, a rise of 35% from its current level.

This figure includes both, the Innova, and the Corolla. "We aim to sell 50,000 units of these cars this year," said Mr. Singh. The company is banking on the post-monsoon festive season for a turnaround in the automotive market.

But, imports and the depreciation in the rupee are casting a shadow in its efforts to cut costs. The Japanese currency has appreciated 33% against the rupee since October last year, making imports from that country much more expensive in India, and thus increasing costs of production here.

Toyota Kirloskar also imports parts from Thailand, paid for in the US currency, which has appreciated 21.6% since August. The company imports 30% of parts by value for its Innova utility vehicle and 55% for the Corolla Altis car.

"That is another reason to go for higher localisation," said Mr. Viswanathan, adding that a review is currently underway for further cost cutting. "But, that will not affect the existing plans for the small car," he clarified.


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