The launch of the Yaris sedan comes at a crucial juncture for Toyota in India.
The Innova Crysta and the Fortuner have kept the company in the race and improved its sales tally by a nominal 4 per cent year-on-year to 1,40,000 units in 2017. Toyota ranked a modest number 7 with a share of just 4 per cent in India’s light vehicle market last year.
However, this is nowhere near the position the Japanese auto-maker would want for itself after having been in the market since 1997. And it is definitely a far cry from its leadership in other regional markets such as ASEAN.
The reason is that Toyota lacks competitive products in the bread-and-butter sub-compact car market, nor is it a major player in the fast-growing SUV segment in India.
The Yaris is Toyota’s answer to strengthening its position. The model is especially important since Toyota’s entry family car duo — Etios and its Liva hatchback sibling — hardly set the sales charts on fire. On the contrary, they ended up being damp squibs.
Hence, the development and introduction of the Yaris perhaps also resulted from lessons learned from these drawbacks, which have not only performed below par in India, but also in other markets. The weak sales of the Etios twins have been attributed to poor styling, lack of important features, and failure to meet high quality expectations that are generally associated with the Toyota brand.
Allaying customer concerns
The company has addressed these customer concerns in the Yaris. Based on the current Yaris hatch, the sedan sibling is stylishly designed and offers a host of features.
Safety has also been given particular importance — the base variant comes standard with seven airbags. Quality is also not a concern for customers, judging by the strong sales of the Yaris Ativ in Thailand.
One limiting factor is that the Yaris is only offered with the 1.5-litre gasoline engine, and there appear to be no plans of a diesel version.
To Toyota’s credit though, the Etios models were benchmarked to meet requirements of several emerging markets. Meeting all customer needs in diverse regions was always going to be difficult.
At the same time, changing market scenarios and decisions have also hurt the anticipated volume of these cars. For example, Toyota had initially thought of introducing them under Thailand’s Eco Car programme. However, it opted for the Yaris hatchback and Yaris Ativ instead.
The Etios Valco also did not perform well in Indonesia and was phased out by the fourth quarter of 2017, after having been in the market for just over three years. We also believe the Etios twins will bow out of Brazil by circa 2020.
Similarly in India, production of the Etios is assumed to end by 2020 and of the Liva by 2025. The Yaris and the yet-to-be launched (but highly anticipated) Yaris hatch should ultimately replace the Etios and the Liva in India.
SUV plans
Simultaneously, Toyota is addressing its weakness in the SUV segment through the recently-signed product-sharing agreement with Suzuki. As part of the deal, Maruti-Suzuki will supply its highly popular Vitara Brezza to its Japanese ally.
In turn, it will retail the Suzuki-badged Corolla from its own outlets. We expect the Toyota-badged Vitara Brezza to hit the market by the fourth quarter of 2019.
To be sure, this must be the first step from Toyota to gain a foothold in the SUV market. There is talk of the company developing new SUVs, but these vehicles are not confirmed yet. Having said this, any new small SUV developed by Toyota would be a strong contender for India.
Moreover, under the deal with Suzuki, Toyota would also receive the Baleno. We think the Toyota-badged Baleno should arrive six months after the Vitara Brezza. We predict combined full-year sales of the two models at 18,000 to 35,000 units through to 2025.
Overall, Toyota Group’s total sales in India are forecast to increase at a compound annual growth rate of 9 per cent to near 3,00,000 units by 2025. Although the Innova is expected to remain the top seller, the Yaris sedan and hatch are also likely to contribute significantly to its volumes.
Wait and watch
What is especially interesting is how the alliance with Suzuki will pan out. It is obviously intended only for the Indian market given that Daihatsu will be Toyota’s preferred growth lever for the ASEAN region. Beyond the Baleno and Vitara Brezza, it remains to be seen if other Suzuki models will be part of this swap parade.
For now, it looks as if this partnership will only get stronger in the coming years. Maruti-Suzuki is the top player in India and Toyota will gain in sourcing popular models like the Vitara Brezza and Baleno. The two are also discussing initiatives in electric mobility, which will also throw up some interesting solutions in the subcontinent.
The Yaris has signalled Toyota’s intent to grow its presence in India, which will only get a further fillip with the Suzuki alliance. Quite unlike the last two decades where it has only had the Qualis and Innova as its star performers, the coming years could see a lot more action for the company.
The writer is Senior Manager, LMC Automotive