Why the Innova still rules India’s roads

The Toyota Innova has built  a cult status in India. No  other vehicle in the MPV segment has come close  to competing with it in the  last two decades.
The Toyota Innova has built a cult status in India. No other vehicle in the MPV segment has come close to competing with it in the last two decades.

Summary

Nearly two decades on, India’s favourite multipurpose vehicle still has no competition

New Delhi: Sometime in August 2020, Velmurugan V., a resident of Thoothukudi in Tamil Nadu, noticed something unusual in his 13-year-old multipurpose vehicle (MPV). The odometer, which measures the distance travelled by a vehicle, had stopped at the 999,999 km mark and could go no further although the MPV itself was running smoothly. That meant his Innova had clocked 1 million km—a feat few would have thought possible; most cars don’t even have 7-digit odometers.

“I never paid any attention to the tripmeter and perhaps realized it a few days after it was stuck at 999,999 kilometres. The engine is still fine and no overhauling was needed. All I have done is dutifully service the car at regular intervals and get the oil and filters changed," Velmurugan said at the time.

What was more intriguing was that his Innova was a private vehicle and not a commercial one. Typically, commercial vehicles such as taxis rack up many more miles on their odometers. The average car user in India travels around 18,000 km in a year, which means most would at best do a quarter of what Murugan has managed. That is, if the vehicle doesn’t wither away to the point of extinction, something less likely with an Innova.

Around the same time Velmurugan breached the million milestone, more than 2,000 kilometres away, in Nathdwara, Rajasthan, 59-year-old Banwari Lal, had notched up over 500,000 kilometres on the oldest Innova in his taxi fleet. It was the third vehicle in his stable, and dated back to 2006—its predecessors were a Qualis (the Innova’s forerunner) and an Indica. While the others had been scrapped, this one refused to die.

“I have a soft corner for this vehicle. My business thrived after it arrived. I know every vehicle has a lifespan of 15 years but I intend to keep this one. Even if the authorities deem it unfit for the road, it will stay in my garage," he says.

Thanks to thousands of customers like Velmurugan and Lal, who swear by the MPV, the Toyota Innova has built a cult status in India. In February, it became the latest entrant in the million club—vehicles that have cumulatively sold over a million units in India. It is only the 13th to do so, and also the biggest and most expensive. All the other cars on the list, such as the Maruti Alto, Swift, WagonR and Hyundai i10, are less than 4 metres in length, and consequently are far cheaper, thanks to a lower tax rate.

In its 18th year, the car is on an unprecedented high—the addition of a hybrid version late last year is likely to catapult it to all-time-high annual sales this year. In fact, that version enjoys a near two-year waiting period and the demand is such that Toyota has had to halt bookings for two variants.

So, why is the Innova Toyota’s golden goose in India? And why has no other vehicle in the MPV segment come close to competing with it in the last two decades?

Built to last

When it was launched in February 2005, the Innova had big shoes to fill. Toyota’s mainstay at the time was the Qualis MPV—globally, the third-generation Kijang—in which the Japanese carmaker had driven into India in early 2000. Despite its boxy shape, the Qualis had built a reputation as a no-nonsense workhorse and at the time some questioned the decision to discontinue a hugely successful car to bring in another.

“We anticipated the requirements of customers and the Innova was a result of that. Based on the global IMV platform (which also spawned the Fortuner and Hilux), it was meant to be a spacious, convenient and practical vehicle for consumers in India," says Atul Sood, associate vice president, sales and strategic marketing, Toyota Kirloskar Motor Ltd. “In a way, the Qualis highlighted the need for a vehicle like that in India, which was not being fulfilled. The Innova simply built on that foundation."

In 2005, the Innova came with a 2 litre petrol and 2.5 litre diesel engine. The MPV had a rear-wheel drive system, and was longer and wider than the Qualis. It could also be equipped with modern safety features such as airbags and anti-lock braking systems—features that have become commonplace today.

“The Innova delivers on multiple fronts. Indian consumers value cars that can withstand challenging conditions with minimal maintenance and the Innova has consistently delivered on this," says Vinay Piparsania, principal, Millenstrat Advisory and Research. “Also, in a country where fuel efficiency has always been an overriding factor, its frugal diesel engines have appealed to a broad spectrum of consumers—from taxi operators, to businessmen, to large families."

The Innova hit the ground running and found nearly 32,000 customers in its first year. The timing worked in its favour. With India’s economy beginning to accelerate, a booming IT/BPO industry meant people movers to ferry young executives to and from offices were in demand. The Innova fit right in.

Sales swelled over the years, touching nearly 80,000 in 2018. While it was never known for its features—the likes of Hyundai and Kia, and of late Mahindra and Tata, are better on that front—timely updates have helped.

The introduction of a strong hybrid version—Hycross, last year has given a further boost to the brand. In August, its sales touched a new monthly high of 8,935 units and so far this year, Toyota has sold over 50,000 units of all Innova variants. Indeed, the MPV is set to log its best ever annual sales performance in 2023.

The demand-supply mismatch is such that for two variants of the Hycross, Toyota has temporarily stopped accepting bookings. For the other variants, there is a waiting period of up to 2 years. Even for the diesel Crysta, customers need to wait for up to 6 months in some cases.

Curiously, the Innova’s popularity as a taxi—something considered a stigma of sorts for brand-conscious young consumers—has never affected the MPV. It also doubles up as the preferred vehicle for policing. Nevertheless, Toyota insists that 85% of its customers use it for personal transportation.

“It (the taxi perception) never bothered me because there is simply no other vehicle as versatile as this," says Delhi-based Vivan Sharan, partner at Koan Advisory, an advisory firm. Sharan has a 5-year-old Crysta and recently added a Hycross to his garage.

“It’s the perfect Indian thali with all the ingredients for a successful product—flexibility, space, frugality, comfort, reliability and resale value," says Avik Chattopadhyay, founder, Expereal, a brand strategy consultancy firm. “That it has evolved over the years from a functional MPV to a premium SUV-ish offering is the cherry on the cake."

Where’s the competition?

Over the years, only a handful of products, such as the Tata Aria/Hexa, Chevrolet Tavera or more recently, the Kia Carnival or MG Hector plus, have tried to compete directly with the Innova. Others such as the Maruti Ertiga, XL6 or Kia Carens have opted to undercut it on price while reducing the size of the vehicle and offering more features. Then there are true-blue SUVs like the Mahindra XUV7OO and Jeep Compass, which are also positioned around the Innova. Those cars have worked but without affecting the Innova.

“Any automaker that has launched a large 7-8-seater MPV has tried to take on the Innova directly but the fact is, not a single competitor product survives," says Chattopadhyay. “Now, with the new version, Toyota has upped the game further and competitors will have to try and catch up. The one company that could have taken on Toyota (Maruti) decided to collaborate rather than challenge." (Maruti has a tie up with Toyota and recently launched a rebadged version of the Hycross as the Invicto).

It is all a bit counter-intuitive, though. A segment that offers both steady volumes with growth potential and healthy profitability is something that should have attracted more players. Instead, the Innova’s presence has deterred others from launching their products.

“While the MPV segment does present attractive opportunities and volumes, entering it at this stage to compete directly with Toyota’s dominant position requires careful consideration, a strong value proposition, and a well-thought-out strategy," says Millenstrat Advisory’s Piparsania. “So rival automakers have decided to focus on other segments where they perceive strength, and a more favourable competitive landscape for their models."

“Entering the MPV segment requires significant investment, including setting up a strong service network and establishing brand trust," says Ravi Bhatia, president and director, JATO Dynamics Ltd, an automotive market research firm. “Indian consumers prefer established brands like Toyota for reliability."

Future ready

While demand for the Innova has traditionally been skewed in favour of its diesel versions, the Hycross has started to balance this. The company claims sales are now evenly split between diesel and petrol. This insulates the brand from any potential adverse regulations on diesel in future.

It is also one of the most profitable brands in the country. Launched with a starting price of under 7 lakh in 2005, the range today starts at 19 lakh and tops out at over 30 lakh for the Hycross. The main reason for this kind of price escalation is the lack of competition for the brand.

“It has traditionally had a healthy profit margin due to factors such as brand trust, demand, and limited competition in its segment. Toyota has managed to maintain this by continuously updating the model, introducing new variants, and focusing on cost-effective manufacturing processes," says Bhatia. “Its strategy also involves investing in localization, which reduces production costs. Additionally, it can command a premium."

The success of the Innova and Fortuner (the leading premium SUV in the 30-50 lakh price bracket) do not, however, hide Toyota’s abysmal record in other segments. Its attempts at cracking the small car and sedan segments a decade ago with the Etios and Liva brands, built specifically for India, were disastrous. It has given up on those segments and now piggybacks on Maruti for crossbadged products such as the Glanza (Maruti Baleno), Urban Cruiser Hyryder (Grand Vitara) and more recently Rumion (Maruti Ertiga). While these vehicles have brought in some volumes—Toyota closed fiscal year 2023 at a record 1.74 lakh units—its market share is still under 4.5% of India’s passenger vehicle market.

An opening for others?

It is unlikely that the Innova will continue to have a free run forever and, at some point, other manufacturers will get their act together. While a long waiting period is good news for manufacturers, it can also be a pain as consumers today are not used to waiting for over 12 months to get behind the wheel.

To reduce the waiting period, Toyota has added a third shift at its Bidadi factory, increasing capacity by 30%, which means it is now churning out cars day and night. “There is a waiting period, but what we like to emphasize is we keep our word when it comes to a commitment to the customer. Our promise is based on the estimated overall supply of parts and kits over subsequent months, so there is clarity for the customer," says Toyota’s Sood.

This does not always play out as planned though and could cause heartburn. Sharan, for example, booked his Hycross in January and was told he would have to wait for six months. But that kept going up. “As the wait got longer, I was tempted to look elsewhere," he says. Sharan finally got the Hycross on 15 September.

So, does this mean there is an opportunity for others? “The long waiting period for the Innova suggests strong demand. Competing brands such as Hyundai or Kia could potentially enter this segment by offering similar features, strong service support, and a competitive price point," says Bhatia of JATO Dynamics. “However, breaking into this market would still be a significant challenge due to Toyota’s established dominance."

There is a marked shift in preference for bigger, more luxurious vehicles in India’s 4 million units per annum domestic market. And the segment that the Qualis helped create for Innova to exploit is simply too big for others to ignore. But the onus will be on them to challenge a vehicle that seemingly has no major chinks in its armour.

Last heard, Velmurugan had graduated to a Jaguar, gifting his Innova to a relative. Lal’s transport empire, meanwhile, has been laid low by the covid pandemic. Like Velmurugan’s marathoner, however, his Innova is in good health.

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