Aug. 22 (Bloomberg) -- Toyota Motor Corp., the world's biggest automaker by market value, may start selling a small car in India in two years to challenge Suzuki Motor Corp.'s dominance of Asia's fourth-biggest automobile market.

``We are thinking about several countries to make the new car; India may be the first,'' Toyota Chairman Fujio Cho told reporters in New Delhi today. The car will be a new model, he said, declining to elaborate further.

Toyota, poised to become the world's largest automaker by vehicle sales, joins Honda Motor Co. and Nissan Motor Co. with plans to make small cars in India to tap a segment that comprises three-quarters of all cars sold in the South Asian nation. Suzuki's local unit, Maruti Udyog Ltd., has a 50 percent share of India's one-million-unit a year car market because it sells as many as five hatchback models.

``For Toyota to continue increasing profit, it needs to expand in markets like India,'' said Ichiro Takamatsu, a chief investment officer at Alphex Investments Co. in Tokyo. ``There is enough room for Toyota and other companies to share the growth in India, as more people will be able to buy cars.''

Toyota, may also build a new factory in India next to its existing plant near the southern city of Bangalore, Cho said.

``If we decide to make the next new model, we may need more capacity,'' Cho said. ``In such a case, we will think about a new factory.''

Toyota fell 0.5 percent to 6,550 yen at the close of trading on the Tokyo Stock Exchange.

Key Car Model

Having a small car in its range will be key to meeting sales targets in a nation where it's lagging behind other manufacturers, with a 3.7 percent market share as of March 31. Based in Toyota City, Japan, the company plans to raise its annual capacity in India 10-fold to 600,000 vehicles a year by 2015, it said last month. The carmaker aims for 15 percent of India's passenger vehicle market by 2015.

The automaker built 44,000 Corolla compact cars and Innova minivans at its factory in Bangalore last year. The company also sells the imported Camry sedan and Land Cruiser Prado sport- utility vehicle.

Sales of Toyota cars fell 19 percent to 7,784 units in the fiscal year ended March 31, according to the Society of Indian Automobile Manufacturers. In the utility-vehicle segment, sales rose 19 percent to 43,559 units.

India's local car sales in the last fiscal year rose by 22 percent to a record 1.076 million, according to data by the automakers association.

Vehicle Sales

Toyota's vehicle sales increased 3.7 percent in the April- July period of the current fiscal year to 17,193 units.

Annual car sales in India may triple to 3 million by 2015, according to government estimates, as economic growth spurs demand. India's middle class, which New York-based consulting firm McKinsey & Co. defines as people with annual disposable income of $4,380-$21,890, has more than doubled to 50 million in the past decade.

The Indian automobile industry aims to reach a size of $145 billion by 2016 from $34 billion now, according to India's Automotive Mission Plan for 2006-16 issued in September by the local automakers association.

General Motors Corp., the world's biggest automaker, started sales of its first minicar model in India in April and Volkswagen AG, Europe's biggest automaker, plans to introduce a hatchback based on the Polo model by 2009.

Honda, Nissan

Honda and Nissan also plan to make small cars in India where hatchbacks have engines of 0.8 liter to 1.6 liter capacities. Automakers have announced plant investments of more than $5 billion by 2012 in the country.

Honda, Japan's second-biggest carmaker, plans to double the annual production capacity of its plant in India to 100,000 by the end of the year. It's also set to open a second factory in the country by the end of 2009 to offer more models, including small cars.

Nissan, Japan's third-largest automaker, is building a 40 billion rupee ($977 million) factory in the southern city of Chennai, with part-owner Renault SA and Mahindra & Mahindra Ltd., India's biggest maker of tractors and sport-utility vehicles. The plant, to open in 2009, will have an annual production capacity of 400,000 vehicles in seven years.

Suzuki plans to raise its capacity in India to 960,000 cars a year by March 2010, as part of a 1 trillion yen ($8.7 billion) five-year global expansion plan. The automaker aims to build 710,000 vehicles in India this year, it said in January. Suzuki owns 54 percent of Maruti Udyog, which plans to change its name to Maruti Suzuki India Ltd.

Last Updated: August 22, 2007 08:11 EDT