Plagued by recalls worldwide,Toyoto taps lower segment in India to push up average sales
The price for buyers of the Toyota Etios has been declared, and much ado has been made about yet another scaled down three-box sedan that essentially grew out of a hatchback, and claims to be new while appearing to be suspiciously closely related to an older model from Toyota known variously as the Toyota Echo, Yaris, Platz and Vitz. We have not seen the hatchback, so far. Though we do seem to hear a lot about something called ‘Q’ Quality and AR Rahman. Word is out on the streets—at these prices, it will certainly be a very successful taxi. For personal use—it is still the hatchback that rules in India.
Truth is that hatchbacks and sedans cost almost the same to manufacture; and hatchbacks, usually with better performance specs thrown in, often cost more than their three-box sedan siblings in developed countries. It is the other way around in India.
In India, however, where cars are increasingly evolving into extensions of offices and rapidly reaching the position of ‘tools of the trade’, a boot performs a variety of functions that a hatchback cargo space cannot and, hence, commands a premium. Fair enough. The Maruti Dzire and Tata Indigo Manza are prime examples. No fuss, they just sell in vast numbers, as Swifts and Indicas. Take a good hatchback, add some more bells and whistles, add a boot, work on the suspension and other essentials, give some more room in the rear seat and then simply see it sell.
But, with the Etios, things seem to be the other way around—no hatchback to build visibility and critical mass at a lower price. Ford learnt the hard way, after countless three-box sedans that performed variously—from sad to desolate—and finally got it right with the hatchback Figo.
The most recent start-up, three-box sedan that came into India with so much or even more fanfare was the Mahindra and Renault (Nissan) joint venture to launch Logan—and look where that took them. The Toyota Etios appears to be built on the same concept, from some aspects—especially the rear. It also looks like a Logan and, according to initial reports, is a prime example of how a manufacturer, who used to set the benchmark on quality but is now plagued with worldwide recalls, is now desperately trying to enter the lower end of the market with products aimed for mass consumption.
Toyota is down at the bottom of the market-share numbers in India and has been known to sneer at the exceptionally complicated demands from the Indian customer; so, in a way, this Etios low-cost car is a dawning of realisation of sorts.
But no hatchback. Because it will have to position the vehicle at an even lower price. Which it can’t do; the experience that Honda has had with the Jazz puts them between a rock and a hard place. And both, Maruti as well as Tata, are not making it easier by making their petrol sedans—Dzire, SX4 and Indigo Manza—increasingly more price-competitive as well as attractive.
So what happens next is that Toyota decides to provide us with a lower specs version of a sedan, where everything is built to a cost, and there is no real benefit to the customer either. The Etios is not there in the aspirational segment either—it already has the Corolla there. So something has to give.
And that’s a pity, because the Indian customer has always equated Toyota with high-end products, always a cut above competition in the same categories and, thus, deserving of a premium. On the other hand, the Toyota Etios, from preliminary reports and dealer/supplier feedback, is not a car for which people may pay a premium, at least after the initial flush of excitement is over.
So is there nothing good about the Toyota Etios? The price of the base version is very competitive. For the rest, a lot will depend on the quality of the production cars. And that’s another report—they are simply not available at dealer outlets for customer trials as yet. What we saw at the launch were probably pre-production prototypes. Now that’s not very confidence inspiring—when do they debug the cars they hope to sell, then?
Going Flat Out
After autos outlive their glam quotient, what will the new status symbols be?
A light engineering goods manufacturer, I know of, has oodles of cash surplus and long order books in export and domestic markets. A family-run successful second-generation business, it holds its own against the Chinese by simply adhering to quality and schedules. It works on advances from customers and buys raw material on credit which doesn’t get better.
As a joint family, they own almost a dozen cars, including some of the best of the lot available in India. However, as purveyors of technical quality, they have a four-fold expansion mainly on internal accruals and reserves currently underway with no shortage of resources. The new machinery they buy is solely on merit, and not based on anything other than technical evaluation of product and service, against a cost. For the same reason, they have put on hold purchases of anything but the most basic of replacement cars for their own use.
The big reason for this is simple—for much lower prices, they get as good, or better, quality of product and service from other manufacturers who may or may not be as well-known or pushing the concept of ‘brand’.
Quality of product and service—whether pertaining to cars for personal usage or plant and machinery for factory—is not country-specific any more.
The other big reason is that all the ‘luxury’ manufacturers push leather seats as a big plus. This is a major no-no in many Indian families, where the elderly do have a say in such things, and it is easier for the younger generation to agree and concede.
One reason is that they would rather use the spare funds for renewing plant & machinery. Another reason is because the Delhi Metro now comes close to where they live as well as work. A few days ago, they were guiding a buyer on how to use the Delhi Metro from his city-centre hotel to a station close to their factory, from where their driver would pick him up. Makes me as proud as when I first learnt how rich ship-owners in London would use the same Tube to travel as did their secretaries.
The other big reason, one that I have heard from others also, is that within a lot of potential buyers there appears to be a ‘satiated level’ which has now been reached. An expensive car is no longer the status symbol it used to be. Is that true? What according to our readers would be the next status symbols?
Achtung!
German ‘Big Auto’ might be hitting a speed bump
It’s happening. The era of German dominance in the luxury-car segment in India seems to be hurtling downwards rapidly, or simply not growing as fast as it should have, at a rate which is leaving the trio of Audi, BMW and Mercedes-Benz breathless and racing to figure out solutions. Discounting alone won’t help, since it will destroy residual values as well as customer confidence. So now it is the silly season—to launch minor variations every now and then. Mercedes-Benz seems to be going overboard with this approach; every few weeks, any small variant is positioned once again as the next best thing to multigrain sliced bread, with knobs and steering wheel.
Jaguar Land Rover and Volvo—one is Indian, the other is Chinese—appear to be emerging as the new winners on the block. And we haven’t even heard of Lexus coming in, though the whispers keep getting louder and louder—Toyota probably wants to get the Etios over and done with before the change in approach. Look out for the new status symbol in sports utility vehicles (SUVs)—the Tata Jaguar Land Rover Evoque. And its variants. They are growing rapidly in the other two important markets worldwide—China and North America. And, as for Volvo, It seems to be the favourite wedding gift this winter season here in Delhi!
By comparison, German cars are now increasingly beginning to look dated—stuff sold to banana republic dictators the world over. Jairam Ramesh not withstanding.
Veeresh Malik started life as a seafarer, and in the course of a work life, founded and sold Pacific Shipping and Infonox Software, to return to his first love—writing — Veeresh Malik
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