Toyota looks at new Etios and Liva for a sales lift

In February this year, Japanese car maker Toyota achieved something it hadn't managed before: it sped past Tata Motors to become the fourth largest car maker in the country. Though Tata Motors' production cut in February may have helped Toyota indirectly, and analysts may term the achievement as some kind of a blip, one can't deny the fact that the car maker managed to cross the market share of over 5% through robust, new offerings over the past couple of years, which even its competitors like Ford, GM India, Honda, who were here before Toyota, didn't achieve.

The company has not only grown its volumes and market share, but it has done so profitably unlike its many peers or rivals. Its compact cars Etios and Liva launched in 2009-10, propelled Toyota's volumes in India and doubled its market share to over 6%, even as its flagship multi-utility vehicle (MUV) Innova powered along.

But for the last 6-9 months, the ride has been tough for Toyota, with Etios and Liva sales having dipped by over 30%-40% -- steeper than the overall market share - despite the Etios family posting 20% growth in annual sales in 2012. Though Etios and Liva delivered value in terms of fuel efficiency, space and lower cost of ownership, experts say that the cars are perhaps less 'inviting' from an aesthetic sense, especially when it comes to 'look-&-feel' and interiors.

"The Etios and Liva are a rational buy as against an aspirational buy like Swift. Toyota needs to improve the aspirational quotient of their cars, which is what these segments demand," says VG Ramakrishnan, MD South Asia, Frost & Sullivan. "A Swift (Dzire) buyer won't look at Etios-Liva as an option because products have been shaved off to get the desired cost and quality, which isn't very exciting. The touch and feel is missing and that's something the company needs to look at to improve volumes," he adds.

Listening to customers

That's precisely what Toyota is doing, listening to customers and getting loads of feedback from the market. "We analyse the feedback from customers and try to incorporate the changes customers are seeking. Some changes can be done quickly, others take time. But the improvements are always taking place. We are making Etios and Liva more attractive, both interiors and exterior," Hiroshi Nakagawa, MD, Toyota Kirloskar India, tells ET.

Toyota had been seeking quarterly feedback from its customers within six months of launching the new vehicles. The deputy MD and COO of Toyota Kirloskar Sandeep Singh admitted that customers' opinion was different from what the company had perceived, and people's expectation from Toyota was much higher than what it had imagined. "Having said that, 88% of our customers are happy with the drivability, space and fuel efficiency, however the rest felt that our products did not match up to their aesthetic needs of interior, touch and feel. We have taken the feedback and are incorporating it through a minor model change," says Singh.

Liva has just 3.32% market share in an over 6 lakh-units market from April to January of FY-13; Volkswagen's Polo, Ford's Figo and Honda's Brio have a higher share than Liva in the premium hatchback space.

However, Etios is number two in the 1.77 lakh units entry-level sedan space, just behind Maruti Suzuki's Dzire with a market share of 17.50%, but that too has fallen from a peak market share of 28% in the same period last year. With Honda launching its Amaze soon, competition is only going to get hot here.

Reaching to the youth

The minor model change of Etios and Liva intends to plug the desirability gap. The company claims the new Etios and Liva will come with modern interiors and changed seat fabrics to woo the youth. Toyota has also tweaked the front grille, rear combi lamps and has redesigned side mirrors with signal indicators to offer a better, refreshed look. It has raised the suspension for both these models and the cars deliver lower NVH (Noise Vibration and Harshness), claims the company.

These cars will sport minor changes in the instrument panel and will now boast features like Bluetooth connectivity; bucket seats will have head rest; and the driver's seat will have a height adjustment button. Toyota has also introduced a peppier 1.5-litre engine option for youth who want more power in their compact cars.

When Toyota launched its utility vehicle Qualis in 2000, people raised eyebrows over the company's policy of introducing a somewhat obsolete model for the Indian roads. But the skepticism disappeared within a couple of years as Qualis became a favourite among fleet operators. Qualis, a big hit among individual owners in South East Asia, got the fleet market buzzing in India.

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The story was the same when the car maker introduced its more expensive MPV Innova in India to replace the Qualis: skeptics questioned the strategy. But after some initial doubts, Innova raced ahead despite its premium tag, and is currently the highest selling MPV in the country.

Toyota hopes to do the same with Etios and Liva. The company believes the best is yet to come for Etios and Liva. "As per the Toyota policy, we believe it takes at least 3-4 years to establish a product. When we launched the Innova, people were confused, but the volumes started picking up in the second year -- today, we sell over 75,000 units. We hope to do the same with Etios and Liva," asserted Toyota's Singh.