Team-BHP - Does Toyota find Southeast Asian countries more lucrative than India?

Why does Toyota find the South East Asian countries more lucrative than India?

Just look at models (particularly the MPVs) showcased at the Bangkok Motor Show from Toyota, its just unbelievable how it considers Bangkok more important than a market as big as India!!

Why do you think a company like Toyota does not find India the best place for a product onslaught and keeps handing over the baton to other players??

Quote:

Originally Posted by vinair (Post 3670367)

A car is not a mobile phone you put in a box and send it over by post.
To sell a car at a reasonable price you have to make it.
Making cars costs money. A lot of money. You have to get land, setup a factory, hire thousands of people and what not.
The business environment in Thailand etc., has been very good for many years, and they have an ecosystem. It takes time for the ecosystem to move. Eg. Detroit died.

Indian ecosystem is still developing. Doing business here is still troublesome(no matter what the PR). There are multiple hoops to jump through.

In the end, if they can be sure they will sell 1500 units+ they will think. For example, can they sell 1500+ of Hilux in India at 15 lakhs? No ways. The 7-8L pickup truck market is not mature enough.

Similar case for other products.
Only if it makes a mass market business sense, will they sell a particular model in India.

+1 to your view Tanveer

One of the major criteria for any manufacturing input is manpower.
Cost of labour has progressively gone up in India as compared to China.
There is cheap workforce availability from Phillipines, China and Vietnam working with various China manufacturing units.

Also, land acquisition and other political considerations needs to be taken into account before setting up a factory.
In a large no. of states, setting up a factory is not very conducive considering that large tracts belonging to agricultural land would be converted.
Additionally, the local village men needs to be convinced, give them employment and other monetary and non monetary benefits.

So, in the end, like Tanveer pointed out, what is the trade off?
May not be such a profitable proposition after all if Toyota does not get the volume it envisages!!

South East Asian (ASEAN) countries might be tiny in geographic size but their combined GDP is about 20 or 30% more than India's. GDP per capita is almost 3 times more than India's. Population is approximately half that of India's. GDP growth too is pretty decent (5 to 6% per year, over the last 10 years)

So why does Toyota or Honda find ASEAN lucrative? It's all in the numbers.
http://www.asiamattersforamerica.org...a/gdppercapita

Thailand has had the top auto manufacturing industry in South East Asia for the last decade or more. So the cars made & showcased there are mainly meant for Singapore market, their biggest - but they are also exported across Asia.

http://www.economist.com/blogs/schum...g-car-industry

India is about 5 years behind them, but will eventually overtake them if we keep growing at >7% annually.

Apart from the fact that the red tape and financial requirement makes every new launch a herculean task, do you really see the need for some of the new models? (I agree that more models would be good, but Toyota already charges a fair bit for their under-equipped model range)

Take for example the Alphard or Vellfire. Both MPVs will be priced above the Innova even if they are stripped of several features. A large chunk of Innova buyers are taxi buyers, would they spend more than 25 lakh for these MPVs/how many private buyers need more than 8 seats? Launching any MPV above the Innova will mainly be for hotel owners. Essentially what they're going to do with the HiAce. So, why would Toyota take the 3-4 digit crore investment for all the logistics that would be involved? Toyota has a strong standing in India, but that's not enough. It has to make sense from the worldwide perspective for Toyota Global to deem the investment viable.

Toyota probably manages less than 1.5 lakh sales annually in India, while they're planning 10 lakh+ sales in China. From a global perspective, Toyota's current approach with India is working well enough. They will most likely lose their title as No.1 car maker to VW by the end of 2015, but their priority is margin per car sold. For all intents and purposes, their "if it ain't broke, don't fix it" approach has proven successful.

Dont worry guys, with GST, so many pro economy steps, and a generally high import rate, we are going to see a lot of manufacturing begin in India. If mahindra can fully localise a 16 lakh car in India, then the day is not far when several other international models up the value chain will be fully manufactured here.

India is really a peculiar case. For Toyota, broadly there are three main constraints:

On the supply side due to various issues, the manufacturing industry is still hugely disincentivised.

On the demand side, Indian market seems very big, but is big only for small hatches or mid size cars.

Lastly, there is an entrenched incumbent who has a significant competitive advantage over others.

Toyota like any other manufacturer has to evaluate its ROI potential keeping the above points(risks) in consideration. So as of now, it does look that they are looking at investments in India which do not expose them to a lot of risk.

I used to live in Bangkok for 20 years or so. Just moved to India in 2013. Let me tell you couple things:

Thailand (not sure about any other SE Asian country) does not have Hyundai or VW or Maruti for that matter (only Swift and now Celerio). Their small cars are just the Mazda 3, Toyota Yaris, Honda Jazz, and Ford Fiesta. So with a smaller playing field to choose from, obviously Toyota and Honda stand out more with their packages. Though the new Mazda 3 is also rather stunning. And its their sales that work out to be so good. The Altis sells there probably as much as a good selling hatchback does here. So it is a more profitable market for all when your bigger segment cars are selling a lot. Even the Camry is a hot seller there.

And not to mention their pickup market which is second largest in the world after USA which is also dominated by Toyota's Hilux Vigo.

Let Toyota launch their Vios and Yaris here. Things might change for the better.

BTW, I mentioned only one country in the whole of SE Asia so this can be used as a reference to measure the total market share of Toyota or Honda in whole SE Asia.

If Toyota were serious about Indian market, they would have never designed cars like Etios and Liva. They priced Liva and Etios on higher side with basic interiors and dated design, no wonder they flopped.

They already had likes of Vios and Yaris in international market. If Hyundai can offer i20, Suzuki can offer Swift and VW can offer Polo to indian market after some modifications, why not Toyota? Just look at Hyundai, they are the one who understood typical indian market very well. Just with an awesome looking tail light, they are able to sell 10,000 i20s per month!

If Toyota had got say Yaris at similar price bracket, I am sure they would have done 5-6K per month. Yaris in US market looks pretty good http://www.toyota.com/yaris/

Let me take a different (in fact Devil's advocate-ish) take in this.
Not just Toyota, every other manufacturer finds India tough, because the customers are finicky lot.

We expect a small car (govt taxation also forces manufacturers to make small cars)
We expect the small car to have Big space inside
We expect the engine to be very fuel efficient
and top of it we expect them to come cheap

This on other hand generate lots of pressure and research cost for a Global Car maker like Toyota and one cant succeed in India unless they have a India specific footprint (similar to Suzuki).
Toyota (and other Global manufacturers) would rather opt to ignore the market and sell only models with Global footprint, but alas in small number, than risking developing something specific for India.

The Thai car market is much smaller than India. We're far more powerful. However, Toyota is the biggest manufacturer out there. It has 1/3rd of the market covered. Here's a link with interesting sales stats. Other than Toyota, Isuzu & Honda, no manufacturer has meaningful volumes there.

Two facts about Thailand: They love their pickup trucks, and the country exports about half of the cars manufactured (source).

Toyota sells ~25 - 30K units a month in Thailand. If it had the right product range, Toyota India could easily beat that. One thing for sure, after the Liva & Etios debacle, we won't be seeing any cheap cut-price cars from the big T here.

Quote:

Originally Posted by xingamazon (Post 3671027)

Not just Toyota, every other manufacturer finds India tough, because the customers are finicky lot.

Customers anywhere are a finicky lot when it comes to cars. Remember, after the house / education / marriage / jewellery, a car is the biggest expense for any household, no matter what country you're talking about.

@xingA

I don't buy india specific car argument.

Aren't Swift, I20, Polo international models (albeit less loaded for india)?

Let's not talk MPVs.

What has Toyota got against the City? (Please do not say Etios)
What does it have against the Brio/Swift/Polo/I20? Liva??
All they sell is the Corolla (petrol & underpowered diesel), Innova & Fortuner.

Is that Toyota has seen this thread or the timing is coincidence?

Toyota studying the Indian market for launching a CUV ( rival-Ecosport rival) and the Compact sedan (rival -Dzire) segments.
But would it be earlier than 2018?

http://www.business-standard.com/art...2500414_1.html