Toyota Kirloskar Motors Ltd, the maker of the popular Toyota Corolla sedan, plans to launch a compact car by late 2009 and expects to sell 52,000 units in the first year, according to component makers who have been asked to submit bids for supplying parts.
Toyota has previously announced that it is looking to build a second factory in the country, where it plans to make the compact car. But it has not given a time frame for the roll-out or indicated how many cars it will sell.
The new car will compete not only with existing rival brands such as Swift and Getz, but also with models from Honda Motor Co Ltd, Volkswagen AG and Ford India Pvt Ltd, which are expected to launch their small cars at around the same time.
A Toyota spokesperson declined to comment.
This will be Toyota’s first attempt to break into the segment that accounts for 77% of the Indian car market. Over one million cars were sold in 2006, driven by a 9% economic growth which has raised salaries and put more money at people’s disposal.
Toyota has indicated to vendors that the car it’s rolling out will be a new model and won’t be based on existing models such as Yaris, said one vendor who didn’t wish to be named. The company will scale output of one lakh units a year, according to the bid information it has put out to suppliers, he added.
The car will roll out with a 1.2 litre petrol engine and a 1.4 litre diesel engine, which will make it eligible to avail the tax breaks for such cars in India.
If a car, which is less than four metres in length, has an engine capacity that doesn’t exceed 1.2 litres in petrol and 1.5 litres in diesel, it attracts only 16% excise duty. Other passenger vehicles are taxed at 24%.
Toyota, which entered the Indian market in 1997, currently sells the Innova multi-utility vehicle and sedans such as the Camry from its 60,000-cars-a-year factory at Bidadi, on the outskirts of Bangalore.
While the company is evaluating different locations for its second plant, it has already got approval from the Karnataka government. In October 2005, the state approved a Toyota proposal to set up a Rs1,147 crore small car plant near its existing plant, which stands on a 435-acre plot.
The proposal, cleared by a committee headed by then chief minister Dharam Singh, projected the plant will have an installed capacity of 1.5 lakh cars and employ about 2,600 people.
India’s market is growing rapidly and demand may cross 2.2 million units by 2010, from 1.3 million passenger vehicles now, according to the Society of Indian Automobile Manufacturers.
This has prompted car makers such as Renault SA and Volkswagen AG to spend Rs30,000 crore to build manufacturing facilities.
—Raghu Krishnan in Bangalore contributed to this story.