Critque Article

In: Business and Management

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Toyota Takes On ‘Do or Die’ Cost Challenge in India
October 21, 2010, 3:25 AM EDT
By Makiko Kitamura and Siddharth Philip
Oct. 21 (Bloomberg) -- Toyota Motor Corp.’s new Etios compact will be half the price of its cheapest model in India as the automaker seeks to win share from Maruti Suzuki India Ltd.
The new car, also to be sold in China and Brazil, will be priced in the range of market leader Maruti’s 405,300-rupee ($9,200) Swift compact, Hiroshi Nakagawa, managing director of Toyota’s India unit, said in an interview in Bangalore. Maruti’s 229,000-rupee Alto is the country’s best-selling car, accounting for 13 percent of Indian auto sales.
“It has been a challenge to build quality at a lower price,” Nakagawa said. “The Indian car market is one of the toughest markets in the world. Customers and car owners are very cost-conscious.”
The Etios highlights Toyota’s struggle to balance sales in low-cost car segments in emerging markets without risking its reputation for quality. The automaker is lowering costs for its new model by increasing the amount of parts purchased in India, with initially 70 percent locally sourced. Engine and transmission production will also start in the nation in 2012.
“Bringing procurement cost to a very competitive level is a do or die challenge for our procurement and production teams,” Executive Vice President Yukitoshi Funo said in an interview on Oct. 4.
‘Premium Over Competitors’
The compact arrives as Nissan Motor Co. plans to sell a $3,000 car in India in 2012 supplied by Bajaj Auto Ltd., the country’s second-largest motorcycle maker. Tata Motor Ltd.’s Nano, the world’s cheapest car, is priced at 131,331 rupees.
The Etios may also be more expensive than similarly equipped models, such as Hyundai Motor Co.’s i10 compact, the nation’s second best selling model, which sells from 365,559 rupees in Mumbai.
“We can charge a…...

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