Can Toyota weave its ASEAN magic in India?

 As the dominant player in Southeast Asia’s light vehicle market, Toyota Motor Corporation can afford to play the waiting game – whether it is to launch its next generation models or to enter new segments.

Take Thailand’s Eco Car I programme for instance: Toyota was the last amongst the participants to launch its eco car model, the updated Yaris, in October 2013. Its strategy was carefully thought out since the Yaris nameplate was already in the market. As an eco car model supported with government incentives, the Yaris was now priced more competitively to take on its rivals.

What is more, the plan worked too. The Yaris quickly became Thailand’s third most sold light vehicle in 2014 and 2015, behind the venerable Toyota Hilux and Isuzu D-Max pickup trucks. Volumes have come down from the peak of 53,000 units in 2014 but are still forecast to average more than 30,000 units annually going forward. Overall, Toyota has a market share of around 30 per cent in Thailand’s light vehicle market.

It is also the market leader in Indonesia and the Philippines (with 30 per cent each) as well as Vietnam (20 per cent). The only exception is in Malaysia where Toyota ranks fifth with 10 per cent share of light vehicle sales. Its total market share in the ASEAN region works out to about 30 per cent. 

In India too, Toyota is not rushing new models to the market. The Innova MPV has been facing tougher competition so much so that Marut Suzuki’s Ertiga became the most sold MPV in India by the end of the first quarter. However, the second generation Innova Crysta only came to the market some weeks ago.

Initial response to the model has been good with the company claiming 15,000 bookings so far. Hence, the new Innova should return to the top of the MPV sales chart. The only inhibiting factor to its growth is the current extension of the Supreme Court ban on the sale of diesel vehicles with engines of more than 2,000 cc in Delhi and the National Capital Region (NCR).

Toyota, like other automakers impacted by the ban, is clearly unhappy and has started to raise doubts on the flow of future investments into the country. Apart from the Innova, it cannot sell the Fortuner in Delhi and NCR either. All told, company executives have said the ban has hit nearly eight per cent of the Japanese automaker’s volumes.

The fear now is that this ban could now extend to other parts of the country with the increasing clamour on diesel by a section of the green lobby. Whether this results in greater customer paranoia and affects sales nationwide remains to be seen.

Meanwhile in the bread-and-butter subcompact car segment, the Etios and Liva are not doing such great business. Yet, Toyota has no immediate plans to replace the models or expand its product range. For now, we expect the Vios to be introduced by circa 2018, possibly replacing the Etios.

The Yaris could be the logical replacement for the Etios Liva or complement the company’s existing range, but there is no indication yet if plans are afoot to bring it to India. Then, there is talk of a possible Daihatsu entry in India specifically after Toyota’s takeover of its fairly independent subsidiary earlier this year. The rationale is that Toyota will look to take advantage of Daihatsu’s expertise in developing small cars, especially when it comes to scaling down and keeping costs in check.

We are thus likely to see all-new vehicles jointly developed by the two companies. Still, we opine that Toyota is unlikely to drop below the Etios twins. Hence, we do not expect it to enter the mini car segment in India with a product developed jointly with Daihatsu. A more plausible scenario is for models to be co-developed for the sub-compact car market, which could also be sold in other emerging markets. Joint development of future SUVs and MPVs is also a strong possibility.

Despite its long presence in India, Toyota is yet to make a very significant mark in the market. This is because of the strong positions of Maruti Suzuki and Hyundai especially in the mini car and subcompact segments. In addition, it faces competition from homegrown players like Tata Motors and Mahindra & Mahindra. Toyota also trails behind compatriot Honda in India which does not add up to a picture of aggression. 

The company’s wait-and-see approach has served it well and it is clear that the same strategy is being adopted in India. Perhaps, this is why there has not been a flurry of all-new entries. However, only time will tell if this careful approach will ensure success in a highly competitive market where constant product refreshes and model expansions are clearly the order of the day. 

 The writer is Senior Manager, LMC Automotive

COMMENT NOW