Toyota to make low-priced cars in India
TOKYO (Reuters) - Toyota Motor Corp (7203.T) said it plans to enter the low-price car market in India, throwing down the gauntlet to rivals such as Tata Motors in the race to win over the nation's millions of cost-conscious consumers.
Tata (TAMO.BO) triggered a fierce battle earlier this year when its unveiled plans to launch the world's cheapest car, the Nano, around half the cost of the current cheapest Indian model from rival Maruti Suzuki India Ltd (MRTI.BO).
Global car makers -- initially skeptical that Tata could produce such a low-cost car -- are now scurrying to make their own versions in the hope of meeting the needs of consumers in emerging economies such as China and Russia.
Ford Motor Co (F.N) plans to build a small car in India within two years, while Nissan Motor Co Ltd (7201.T) and Renault (RENA.PA) aim to build a $3,000 car with Bajaj Auto (BJAT.BO).
Toyota's 35 billion yen ($343 million) new production facility, to be located on the outskirts of southern city of Bangalore, will start output in 2010 with initial capacity of 100,000 units a year, the automaker said on Friday.
Analysts expect the new cars to have a price tag of around 700,000 yen to 800,000 yen ($6,900-$7,850).
"That will not immediately compete with Tata Motor's $2,500 People's cars, though in the future Toyota may jump into the lower-priced car market using Daihatsu's know-how," said Yasuaki Iwamoto, analyst at Okasan Securities.
The move follows its announcement on Thursday that Toyota would almost double its stake in Subaru maker Fuji Heavy Industries Ltd (7270.T) as part of an alliance aimed at more efficiency developing and producing cars.
Toyota's unit Daihatsu Motor Co (7262.T) specializes in production of small cars and commercial vehicles.
Toyota holds a 16 percent share in the U.S. market, but its sales in emerging markets remain small. Its market share in India is 2.6 percent, Toyota said.
Prior to the announcement, shares in Toyota closed up 2.5 percent at 4,950 yen, underperforming the Nikkei average .N225 which rose 2.9 percent.
(Additional reporting by Yuko Inoue; Editing by Lincoln Feast and Mike Elliott)
