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Toyota Targets Maruti With ’Aggressive’ Price for Etios in India

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Toyota Adds Etios to Battle Rivals in Emerging Markets
Akio Toyoda, president and chief executive officer of Toyota Motor Corp., left, and Vikram Kirloskar, vice chairman of Toyota Kirloskar Motor Pvt., attend the unveiling of the Indian-built Etios in Bangalore, India. Photographer: Namas Bhojani/Bloomberg

Dec. 2 (Bloomberg) -- Toyota Motor Corp.’s lower-than expected price for its new Indian-built Etios compact car may help the automaker escape a sales ranking of seventh in Asia’s second-fastest growing major economy.

The model went on sale yesterday in the world’s second-most populous nation. Priced from 496,000 rupees ($10,900), it is Toyota’s cheapest offering in India and will sell for less than Honda Motor Co.’s 815,000 rupees City compact and Ford Motor Co.’s 589,030 rupees Fiesta. Maruti Suzuki India Ltd.’s rival Swift car sells from 405,300 rupees to 731,000 rupees.

“The pricing is very aggressive. It’s a lot lower than what I was expecting,” said Ashvin Chotai, London-based managing director of Intelligence Automotive Asia, an industry consultant. “The challenge is to maintain its very strong brand image. Value for money can destroy a strong premium image.”

President Akio Toyoda, 54, introduced the car yesterday in Bangalore, the first time he’s attended an overseas car presentation as chief executive. Toyota, with a market share of 2.8 percent in India during the first 10 months of 2010, needs to win customers from market leader Maruti as it seeks 10 percent of the market in five to seven years.

Toyota placed such importance on the Indian-built Etios that it was the only new car the company didn’t delay amid the global financial crisis.

’Thin’ Profitability

“Profitability may be thin in small cars, but we are looking at the long-term,” Toyoda said in an interview yesterday with Bloomberg UTV.

Sold as a small sedan, with a hatchback to follow in April, and built at a plant in Bidadi, near Bangalore, variations on the Etios will later be added in China, Brazil and Thailand.

“Toyota has been very slow in getting its act together in India,” said Darius Lam, a Bangkok-based analyst at researcher J.D. Power & Associates. “It’s hard to overstate the importance of Etios to Toyota’s future success in India.”

Toyota aims to sell 70,000 units of the Etios in the first year, the company said. It sold 62,000 vehicles in India this year through October, compared with Maruti Suzuki’s 874,000 deliveries and Hyundai’s 299,000 vehicles. Maruti Suzuki controls 39 percent of India’s light-vehicle market, while Hyundai ranks third with 13 percent, according to J.D. Power.

“We are aiming for a full-scale presence in India,” Toyoda told reporters yesterday. “With the Etios, we are able to serve an even broader range of customers.”

Shares in Toyota rose 2.8 percent to 3,310 yen as of the 3p.m. close in Tokyo yesterday. The stock has fallen 15 percent in 2010.

China Sales

The Etios may also help the automaker, based in Toyota City, Japan, narrow a sales gap with GM and Germany’s Volkswagen AG in China, the world’s biggest auto market.

Sales of the Toyota brand in China grew 17 percent to 644,000 this year through October, compared with a 36 percent gain to 1.98 million units for market leader General Motors Co. Volkswagen AG delivered 1.65 million vehicles in the period. The Japanese company hasn’t yet announced a date for the Etios introduction in China.

Toyota’s cheapest model in China is currently the Vios, which is 23 percent more expensive than BYD Co.’s F3 compact. The F3 is the country’s most popular car, priced at 70,800 yuan ($10,620).

Toyota designed the Etios specifically for emerging-market customers, betting the less-expensive model can win new buyers without tarnishing its reputation for reliable cars. Until now, the Innova minivan was Toyota’s cheapest vehicle in India, starting at 826,433 rupees in Mumbai. Neither model comes with airbags as standard.

‘Do or Die’

The automaker is lowering costs for its new model by increasing the amount of parts purchased in India, with localization reaching 90 percent as engine and transmission production start in the nation in 2012.

“Bringing procurement cost to a very competitive level is a do or die challenge for our procurement and production teams,” Toyota Executive Vice President Yukitoshi Funo said in an interview in October.

While cheaper than other Toyotas, the Etios arrives as Nissan Motor Co. plans to sell a $3,000 car in India in 2012 supplied by Bajaj Auto Ltd., the country’s second-largest motorcycle maker. Tata Motors Ltd.’s Nano, the world’s cheapest car, is priced at 131,331 rupees.

The success of India-built Etios cars may depend on exports, following a similar path to Nissan’s Chennai-built Micra, said Chotai.

Healthy Balance

“Nissan has been able to ramp up production mainly with exports,” Chotai said. “A lot depends on a healthy balance between exports and local sales.”

Even so, Toyota may benefit from adding a car that competes with the best-selling models in the nation.

“The Etios has an incredibly good price. This shows that the company is very serious about taking business away from the competition," said Deepesh Rathore, managing director, India, at IHS Automotive. "I don’t see any reason why the Etios shouldn’t be successful."

Monark Munshi, an executive at a local company in Bangalore, says he will persuade his father to buy the Etios instead of the Honda City.

‘‘At this price it is a bargain,” Munshi, 21, said. “The interiors, the hood and the grill are sporty. I love the car.”

To contact the reporters on this story: Makiko Kitamura in Tokyo at mkitamura1@bloomberg.net; Siddharth Philip in Mumbai at sphilip3@bloomberg.net

To contact the editors responsible for this story: Kae Inoue at kinoue@bloomberg.net; Neil Denslow at ndenslow@bloomberg.net

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