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Safety pays off for Toyota

Just six of the 17-odd passenger vehicle manufacturers managed to post sales growth in the last fiscal - a period that saw high interest rates and low rural offtake. Passenger vehicle volumes closed under 4 per cent last year to 2.6 million units as against 2.5 million units sold in 2013-14, as per data provided by the Society of Indian Automobile Manufacturers.

The six who finished in the positive sales territory were Maruti Suzuki, Hyundai, Honda, Nissan, Toyota and lesser known Japanese auto maker Isuzu. But there is a catch.

While new launches helped five of these companies to tide over the slowdown, the outlier was Toyota Kirloskar Motors, which did not launch any new product last year, except for a few upgrades. Yet sales for the Bangalore-based firm grew 10 per cent last year.

In comparison, Maruti launched Ciaz and Celerio, Hyundai launched elite i20, Nissan's sister concern Datsun launched Go+ and Honda introduced the new City which helped bring in incremental volumes. Toyota meanwhile launched only a derivative of the Etios called Etios Cross.

So what worked for Toyota? Experts say it understood the safety concerns of buyers. By October last year, Toyota completed installing airbags in each variant of models sold in India. This included even the base variant of the entry level hatchback Etios Liva. While Maruti Alto and Hyundai Eon also offer this safety feature, it's available only for one of their variants.

Though this has pushed up the cost of all Toyota vehicles, volumes closed better at 141,347 units as against 128,811 units sold in 2013-14. N Raja, director and senior vice-president, sales & marketing, Toyota Kirloskar Motors, said, "The Etios series has constantly been receiving good acceptance from customers, especially since the launch of the new Etios and Liva in October 2014, when the airbags were standardised across all grades (including the entry grades) of the Etios series".

According to the company, Etios series volumes jumped 12 per cent in the October-May period to 36,476 units as compared to 32,680 units sold in the same period last year.

By October, each product from the Etios series were fitted with airbags and by January a few variants of its top-selling Innova were fitted with airbags.

Sridhar V, Partner, Grant Thornton India LLP, said "Overall consumer awareness about safety has gone up and they have felt the need for safety features like airbags especially after that NCAP certification issue that came about last year. Adding an airbag and launching at an affordable price point certainly makes sense.

For the customer it adds significant value. Even entry-level cars like Maruti Alto and Hyundai Eon offer an airbag variant".

But Toyota has a lot of catching up to do. Unlike its peers, Toyota, which was one of the first Japanese companies to enter India, still has several product gaps in its portfolio. These untapped segments comprise compact sedan, compact sports utility vehicle, a premium hatchback, a no-frills entry hatchback, a compact utility vehicle and a mid-size sports utility vehicle.

Maruti Suzuki, India's biggest car maker has progressively plugged each of these gaps with the exception of a compact SUV which will be launched next year. Hyundai and Honda too are working to launch models in new segments like SUV and premium hatchback.

The compact sedan segment that features Maruti Suzuki Swift Dzire and the compact SUV segment featuring Ford EcoSport has met with huge consumer traction in the last two years. Toyota is absent in both these segments.

But, according to sources, the company is working on changing that. A sub-four meter compact sedan on the lines of the Dzire and a compact, sub Rs 10 lakh SUV is in the works. Senior executives from Toyota's Japan headquarters are doing frequent visits to India to strengthen the product development work.

Sources further say that Toyota is working on two new engine platforms to be used in models that will be launched in 2017. Presently Toyota has a limited engine range, 1.2 litre petrol and an 1.4 litre diesel for the Etios range and upwards of 1.8 litre diesel for bigger vehicles like the Corolla, Innova and Fortuner. For the next generation models, Toyota will require something that could plug the gap.

"In line with our endeavor to bring in world class products to India we are continuously working towards introducing new and advanced vehicles. As a policy we refrain from commenting on any future plans", Raja said in a statement.

But will Toyota be too late to enter?

By the time Toyota address its products gaps, almost all its competitors would have launched new products in the respective segments. Some of its competitors are struggling to sell in categories which have been developed by the segment leaders.

For instance, volumes of Honda Brio, a premium hatchback, is no match to its equivalent Swift from the Maruti stable. Similarly Renault's Lodgy, Datsun Go and Go Plus are struggling against competition like Maruti Suzuki Ertiga, Wagon R to name a few.

"Toyota is slow because its business philosophy forbids it to make compromises on quality. Product development cycle thus takes longer than others", said an auto parts supplier.