The Toyota Yaris Ativ, which was introduced in Thailand in mid-August, could play a more pivotal role in the automaker’s regional and global strategy. We at LMC Automotive think it is possible that the Ativ may replace the Vios sedan in the medium to long term.
The Vios, while popular, is sold in only a handful of countries with total sales of merely 2,32,000 units last year. Half of this volume came from China, with the rest mostly concentrated in South-East Asia.
Looking ahead, we also anticipate the model to enter new major markets such as Argentina, Brazil and India. Potential sales in these countries would be the catalyst behind the Vios’s future growth. In the meantime, sales in China should stay stable at about 1,00,000 units a year. Demand in South-East Asia is also foreseen to expand slowly to peak at 1,55,000 units by 2024.
It is unlike Toyota to launch a new vehicle for a single market or region though. That’s why a rapid success of the Ativ in Thailand could possibly convince the company to expand the new sedan to other markets in South-East Asia. This could then result in some interbrand cannibalisation, further hurting demand for the Vios in the region if more buyers substitute it with the Ativ.Potential replacement
We also think that the Ativ may be the more logical replacement for the not-so-successful Etios sedan in India. Hence, removing the Vios from India would further cut its global volume by 10,000-60,000 units.
We believe establishing the Yaris Ativ as a global model would be a sound strategy for two main reasons. First of all, the Yaris brand is already world renowned vis-à-vis the Vios nameplate. Marketing the Ativ as the sedan sibling of the global Yaris hatch may require less effort, time and investment.
Two, the Ativ has relatively lower development cost since it is based on the current Yaris. This is noticeable from its affordable pricing in Thailand. Such price competitiveness would, therefore, allow the model to effectively take on the mainstream players in challenging emerging markets such as India.
Indeed, a stylish and affordable new subcompact sedan is critical for Toyota in India. The automaker is losing out on the growth in the bread-and-butter segment, where the Etios and its Liva hatchback sibling have very little to write home about.
In 2016, Toyota was the seventh largest light vehicle seller in India with a market share of 4 per cent, which left it trailing behind Japanese rival Honda by 20,000 units. Granted, though, that its sales could have been higher last year had the Supreme Court not banned the registration of vehicles with diesel engines exceeding two litres in Delhi NCR.
Regardless of which of the two models Toyota selects as its new subcompact sedan in India, be it the Vios or the Yaris Ativ, this will serve to fill the gap left by the demise of the Etios — which we anticipate to be phased out by 2020.
Moreover, complementing either the Vios or Yaris Ativ will be the Yaris hatchback. We expected it to debut in India by 2020. Crucially, the launch of these two key models should drive growth for Toyota in the medium to long term in India.New ventures
The successful model in the company’s stable is the Innova, which, more importantly, has been very profitable. Even after the eight month diesel ban in Delhi, the recently launched Crysta quickly made a strong reconnect with customers and sales have been brisk. Toyota has also been in the news lately thanks to its proposed R&D alliance with Suzuki whose Indian arm, Maruti, is the clear leader of the pack. For the moment, the two companies have only indicated an intent to collaborate but going by the rapid pace of alliances among homegrown Japanese automakers (Toyota and Mazda being the most recent instance), the alliance could happen sooner than later.
Also given that India is gearing up for the next phase of emissions control, which will emerge as the Bharat Stage VI norm in 2020, there is every good reason for Toyota and Suzuki to come together especially in the context of the former’s size and ability to leverage global competencies. This will also be relevant for electro-mobility where India has articulated an aggressive intent for its automotive ecosystem to go completely electric by 2030.
The writer is Senior Manager, LMC Automotive
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