India's car population may be growing but the growth is mainly concentrated in the small car sector, and not without reason. With increasing interest rates making buying cars costlier and the government slapping new duties on larger vehicles in addition to the existing favourable tax regime for smaller cars, even premium players are wading into the small-car scene. (See: Government squeezes fuel-guzzlers, imposes extra tax on large vehicles)
Indian passenger car sales rose by 11.79 per cent between April 2007 and March 2008 to 1.2 million units. Competition in the small car segment is set to increase in 2009, with planned launches by Maruti Suzuki (A-Star and Splash), Honda (Jazz) and as yet unnamed models from Ford, GM and Volkswagen. (See; Ford planning petrol and diesel variants for small car in India and GM to produce second small car, cheaper than Chevrolet Spark)
Japanese carmaker Toyota, all set to surpass General Motors as the world's largest, is the latest entrant when it made its intentions clear on the occasion of the laying of the foundation stone for its second factory in India.
The decade-old Indian joint venture of the Japanese automaker, Toyota Kirloskar, is building its second plant at Bidadi, about 40 kilometres from India's IT hub of Bangalore, with an upfront investment of Rs14,000 crore ($329 million) to manufacture a range of passenger cars and multi-utility vehicles. Toyota is the majority partner with an 89-per cent stake with Kirloskar owning the rest.
On Thursday, Karnataka chief minister B S Yeddyurappa unveiled the foundation stone for the new plant that will have a test track and additional space for suppliers and other vendors. The ceremony was attended by Toyota senior managing director Akira Okabe, chairman Ryoichi Sasaki, vice-chairman Vikram Kirloskar and managing director Hiroshi Nakagawa.
The modular plant, to be commissioned by 2010, will have an installed capacity of 100,000 units annually and will employ about 2,400 people. Top officials confirmed that the company will soon be introducing its newly designed compact car in the Indian market.
Okabe said, ''The factory will be ready by mid-2010 and we are yet to finalise the launch date of the new car. We have basic concept of the new car ready and very shortly we will finalize the design of the car.''
According to Okabe, the plant which is being set up will see an initial investment of Rs1400 crore. But this initial investment won't include certain other costs like installing robots and other automation equipment.
The arrangement of this additional amount required for the plant would be worked out later. A new test track will be included in the second plant, which is expected to be spread over 130 acres of land.
Okabe also disclosed that though the new compact car has been designed for the Indian market, the initial design features indicate that it can be exported to other markets in Asia. Daihatsu, Toyota's group company, will not be involved in designing the compact new car, though it may be included in future plans, Okabe added.
However, Tata Motors and Bajaj Auto can rest easy for the time being. Although Okabe confirmed that the new product will be the cheapest in the Toyota stable, indications are that it maybe priced higher than its Indian competitors.
Vikram Kirloskar said as much when he commented, ''We are working on the new design. The model is yet to be finalised. We plan to have petrol as well as diesel versions. The small car will not compete with the upcoming Nano of Tata Motors, touted to be the world's cheapest car.''