UPDATE 1-Toyota's second Indian plant to start by end-2010

* Toyota to roll out compact car for India from new plant

* Says Indian market recovering; sees great potential

* Expects to maintain sales at last year levels

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MUMBAI, June 9 (Reuters) - The Indian unit of Japan's Toyota Motor Corp (7203.T) expects to start production of a compact car at its new plant by the end of 2010, with an initial capacity of 70,000 vehicles a year, a top official said on Tuesday.

The second Indian plant is being built at a cost of about 30 billion rupees ($630 million) in southern Karnataka state, where its first plant is also located, said Sandeep Singh, a deputy managing director at Toyota Kirloskar Motor India Pvt Ltd.

The compact car will be made specifically for the Indian market, he said at a launch of Toyota's new Land Cruiser.

Toyota, which owns 89 percent of the Indian venture, had planned to start the second plant with annual capacity of 100,000 units, but this had been scaled down because of the downturn in the auto sector.

"We can easily ramp it up to 100,000 units, when we want," said Singh.

Having cut output at its existing Indian plant by 20 percent between November and May as demand fell, Toyota is raising capacity to return it to 65,000 vehicles a year, he said.

The plant is expected to produce 4,300 vehicles in June and up to 5,300 units in July, he said.

"The Indian auto market is seeing a recovery. We are expecting great potential from India," said Managing Director Hiroshi Nakagawa.

Toyota Kirloskar, which offers the Innova utility vehicle, Corolla and Camry sedan in India, hopes to sell more than 50,000 cars in 2009.

"We would like to maintain what we did last year," Nakagawa said. Toyota sold 51,500 vehicles in India last year.

Toyota, the world's biggest automaker, posted its first-ever consolidated operating loss last year after a record profit the year before. It has been hit harder than most by the global auto slump because of its exposure to the United States and Japan, where sales have plunged to multi-decade lows.

Its new car plant in India is one of the few projects globally that it is still going ahead with. ($1=47.5 rupees) (Reporting by Janaki Krishnan & Aniruddha Basu; Editing by John Mair)