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Toyota betting big on markets like India to fuel growth

Toyota, like other car manufacturers, is betting big on markets like India to fuel growth. Most of its products are sold in developed market like US, Japan, Europe, but one cannot expect exponential growth from these markets.

, ET Bureau|
Mar 09, 2011, 05.30 AM IST
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Enroute to Chennai, Hiroshi Nakagawa, MD of Toyota Kirloskar Motor (TKM) lost his way on the Bengaluru-Chennai highway. Nakagawa asked his driver to ask for directions. “I told him to specifically ask for the nearest Toyota showroom to get back on the right road”, says Nakagawa. However, asking about a Toyota showroom didn’t yield any result. “Then suddenly my driver asked for the nearest Qualis dealer and everyone immediately knew it”, he says. This was three years back and it may now seem as an amusing anecdote, but Nakagawa says it drove home the point that while there was an immediate recall for the product name, the brand name didn’t ring any bell in India. Today with the launch of Toyota Etios, Nakagawa wants to ensure that both Toyota and Etios acquires equal mind space among Indian consumers.

“People knew the product but they didn’t have any clue about its parentage. It was a matter of concern for us. So when we launched Etios we decided to promote it as Toyota Etios”, says Sandeep Singh, deputy MD (marketing), TKM. India is the first country to launch Etios and yet to go international. A Nielsen survey for Etios (December 2010 to January 2011) covering 600 respondents across 10 cities stated that recall for Etios was 75% among the respondents, says Singh. “Most people could remember Etios, recall the ad, had heard of it from friends and also connected it with Toyota”, he says.

Apart from being the first car to be developed, designed and launched in India, the Etios launch liberally used the online and digital platform. Since the launch in December 2010, Singh says that Etios has sold 4,844 units and the waiting period now spans anywhere between six and eight months. When Toyota couldn’t cater to the huge demand that Etios has generated, many customers chose to cancel their bookings. However Singh is not worried, “Our cancellation was far less than what we expected, only about 6.6% compared to about 15% that we had anticipated.”

When it comes to Toyota brand name, the carmaker has been in the news for the wrong reasons in the last two years. Technical defects and faults forced the world’s largest car maker to recall over 9 million cars globally. India, claims Nakagawa has largely been unaffected by the negative brand image the recalls generated. “We had many touch points where customer could call us to discuss the problem — call centres, our dealers. Customers came to us with any questions they had and we solved them.” Market observers also mention that Toyota is a recent entrant in the Indian market and therefore the brand in the market has escaped relatively unscathed from the global happenings. For Toyota, the Qualis and the Innova in the multi-utility segment gave the company a foothold, which the company is to entrench with the Etios in the highly competitive sedan segment.

Similarly, the company entered the growing SUV segment with the Fortuner. The late entry into India means that TKM has had to look at the MUV, sedan and the SUV segment instead of the most popular segment in India — small passenger cars. Apart from fierce competition further accentuated by the presence of the Nano, Nakagawa says that margins also don’t make it a viable option. “To produce a good quality small car matching Toyota’s standards of quality between Rs 3-4 lakh is a very big challenge for us. When we did the market survey to understand customer aspirations we found that the mid sedan is best suited for Toyota to grow in the coming years”, Singh adds.

Toyota, like other car manufacturers, is betting big on markets like India to fuel growth. “Most of our products are sold in developed market like US, Japan, Europe, but one cannot expect exponential growth from these markets. They will be very stable markets, but markets like India, China, and Brazil are the future, especially India where we don’t have much presence.

Limited presence also means huge opportunity for us”, says Nakagawa. According to company figures, TKM grew 38% in sales in 2010 selling 74,759 units, compared to 54,320 units in 2009. Although, the trust in Japanese technology in automotive gives car brands like Toyota and Honda an edge in India, aggressive moves by European car brands, both in small cars and sedans, means that TKM will have to step on the accelerator. “Today, the choice for a sedan is either Toyota or Honda because there aren’t many alternatives. But with more car brands launching in this segment, the Indian consumers will have more choices in the time to come”m remarks an automotive market observer.

TKM knows this and with the entry into the sedan segment, TKM, says Singh has become proactive particularly in establishing a robust dealer network. “The difference between our earlier vehicles and Etios is that 50-60% of the former are chauffeur driven, while the Etios, we believe is going be driven by the owners. So we have increased our dealer outlets; brought the workshop nearer to the dealership and are investing more in training personnel at the dealerships”, says Singh.
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