Eyeing small to make big

Mumbai: Toyota Kirloskar Motor seems to have finally decided on its future course of strategy for the very price and value-conscious Indian automobile market. Hence, Toyota is said to be seriously considering an entry into the small car segment with a new car developed for the Indian market specifically and a replacement for the Qualis, which is at present in the process of development.

Industry analysts feel that though the Qualis may well continue to sell in large numbers in the next few years, given its excellent reputation as a trouble-free vehicle, it may be time for the company to initiate plans to replace the vehicle. This is mainly because of the increasing competition in the multi-utility/sports utility vehicle (MUV/SUV) segment, which sooner or later will begin to impact the Qualis' sales.

The Qualis doesn't have reason to worry about competition from the recent D segment SUV launches like the Chevrolet Forester, the Suzuki Grand Vitara or the Honda CR-V, which are imported into the country as completely-built units (CBUs). The new SUVs are in a different price- and size-segment altogether from the Qualis.

But what Toyota may have to worry about in the future are the intended MUV/SUV launches from Ford India, General Motors India and Mahindra & Mahindra, which will be manufactured in India in order to avail of price advantages.

Thus the Qualis could face stiff competition from the GM Panther, the M&M Rexton and the Ford Everest two years down the line. The Qualis already faces rivalry from M&M's Scorpio. Launched last June, the Scorpio began by eating into sales of the Qualis, which fell from a high of 2,900 units in September 2002, to 2,430 units in October to around 2,000 units a month by the end of last year.

Toyota sold 2,006 units of the Qualis in November, 2,102 units in December last year and 2,186 units in January 2003. In the last one year, M&M sold 15,000 units of the Scorpio. Earlier this year, Toyota introduced a trendier and more polished version of the Qualis at a nominally higher price, which helped it to regain its position somewhat.

In the month of May, the Qualis sold 2,643 units and even though its sales fell by 8 per cent in June 2003 (generally a bad month for carmakers with a late monsoon making it worse) at 2,437 units over the previous month, on a year-on-year basis, the Qualis' sales had grown 20 per cent. The Qualis sold 405 more units in June 2003 against 2,032 units in June 2002. The Qualis sold the largest numbers in March this year at 3,531 units.

Toyota expects to sell around 34,000 units of the Qualis during 2003, about 9,000 more units than it sold during 2002. The Qualis is Toyota's largest-selling MUV in the country with a market share of above 40 per cent in its segment. The company has sold a total of over 90,000 Qualis units since its launch three years ago.

Though the company has been talking of phasing out the Qualis and replacing it with an international model, nothing concrete has taken place. All that has happened is that Toyota launched a 'New Qualis' early this year with cosmetic changes, and last month it came out with the most-expensive variant of its Qualis in India till date — the Royal Saloon Diesel priced at Rs 8.07 lakh.

Recently, however, there has been some serious thinking on the Qualis and last month company director Toyota Satoshi Aoki announced that the Qualis will be replaced by a new MUV within the next four years. Not only this, the new MUV will be an international model, which is currently being development by the parent firm. He said the model was being developed abroad and will first hit other Asian markets over the next one year. Later, the company will look at introducing it in India.

Toyota's other cars in the market are the Corolla and the Camry. The Corolla, positioned in the C++ segment, has been more successful than the Camry. This is chiefly because while being supported by the tremendous brand equity of the Toyota brand in India, it is priced in the more affordable range of below Rs 10 lakh while the Camry, on account of being imported as a CBU, comes in the Rs 20-lakh bracket.

Both the Corolla and the Camry recorded lower sales in June. The Corolla registered 10-per cent lower sales at 742 units, while the Camry sales dropped nearly 39 per cent to 35 units. The Corolla sold 2,745 units in the period between February and June while Camry sold 369 units in the same period. The company has set a sales target of 10,000 units of the Corolla for 2003.

In all, Toyota sold 15,437 vehicles in the period between January and June this year of which the Qualis contributed the major amount. The less-than-exciting performance of the Corolla and the Camry, coupled with the sparkling performance of small cars like the Hyundai Santro, the Zen Alto and the WagonR and the Maruti 800 in the last three months, seem to have prompted a shift in thinking among the decision-makers in Toyota.

A few weeks ago Toyota Kirloskar announced its decision to enter the entry-level mid-sized and premium hatchback passenger car segments in India. Having concluded its first feasibility study of the Indian passenger car market, Toyota has zoomed in on the B (Zen, Santro) and the entry-level C (Esteem, Ikon) segment to attain volume sales.

But the company has decided against introducing any of the available small- and mid-sized cars from its existing portfolio, including the Daihatsu Mira, earlier a frontrunner for the Indian B-segment market.

Now company officials say it is easier to develop a new model for India both in the small- and mid-sized segment rather than bringing in the Mira. This is mainly because India is a very price- and value-sensitive market and it makes sense to develop an India-specific model. Some of the other models tested for the market were the Yaris and the Vitz.

The addition of these new models to the production line-up, the company says, will result in substantial capital infusion and expansion of capacity. "The company is currently running at 100-per cent capacity utilisation and is looking at rationalising its set-up to augment capacity to meet the current demand."

Toyota Kirloskar Motors aims to be among the top three carmakers in India quite soon.