Exclusive: Struggling in India, Toyota asks Daihatsu minicar unit to help - sources

Thu Nov 6, 2014 4:10pm EST
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By Norihiko Shirouzu and Aditi Shah

OSAKA Japan/NEW DELHI (Reuters) - Toyota Motor Corp (7203.T: Quote) is struggling to crack the affordable end of India's car market and has called on mini-car affiliate Daihatsu for help - a tacit admission that the Japanese autos giant doesn't always get it right in emerging markets.

A similar partnership between Toyota and 51 percent-owned Daihatsu Motor Co 7262.T has proved successful for years in Indonesia, Southeast Asia's biggest car market - though that crown may be slipping now.

Toyota Executive Vice President Yasumori Ihara asked Daihatsu management earlier this year to help design affordable small cars suited to buyers in India, where Toyota models tend to come with a relatively high price tag, said four Daihatsu executives and a Toyota executive with knowledge of the matter.

The request could see Daihatsu take the lead in developing no-frills cars that would be sold under the Toyota name and through Toyota's sales channels in India. Unlike in Indonesia, Daihatsu currently doesn't sell cars in India.

"Toyota is struggling big time in India" largely because it uses relatively "high-quality, high-spec" components for its cars there and failed to make use of cheaper parts available from indigenous local suppliers, a senior Daihatsu executive told Reuters.

In contrast, rivals such as Suzuki (7269.T: Quote) have set up comprehensive local supply chains for low-cost parts in India.

"We're currently looking extensively into why a strategic no-frills car like (Toyota's) Etios doesn't sell well in India ... as part of an effort to ready ourselves in case we're asked (to develop low-cost cars) formally by Toyota," another senior Daihatsu executive said. The executives didn't want to be named as they are not authorized to talk to the media.

They gave no specific details of how Daihatsu would help Toyota's India effort, but said Indonesia would likely serve as a model. There, several models including the most affordable minicar, the Agya, which Toyota markets, are supplied by Daihatsu, which also competes in the market.   Continued...

Onlookers stand next to Toyota's Etios compact car at India's Auto Expo in New Delhi in this January 5, 2010 file photo.  REUTERS/Vijay Mathur