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Toyota (TM) Alters Hybrids Strategy in India to Capture Market
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Toyota Motor (TM - Free Report) recently announced that it is rebooting its strategy for India by doubling down on a bet that emerging markets will generate demand for hybrids if provided at the right price.
Toyota’s hybrid Camry sedan performance, since its India debut in 2013, has not been impressive. Sales numbers for the vehicle have remained low partly due to a sticker price that was more than eight times the annual income of a middle-class family in the country.
Now, the Japan-based auto giant is keen to play the game differently with lower-cost hybrids. It intends to bring down the cost of full hybrid powertrains by manufacturing them domestically in India.
Toyota's fossil-fuel hybrid-dependent strategy in India is a misfit with that of other global rivals who have paced up efforts to roll out pure EVs. Thus the hybrid bet is an acid test for Toyota’s success in the sub-continent.
Usually, hybrids are cheaper than EVs as they have smaller batteries and do not rely on charging stations. These factors are key parameters in markets like India where customers are price sensitive and charging infrastructure can be weak.
Per media sources, Toyota wants more first-time buyers in India to own full hybrids as initial steps toward mass electrification. Gradually it would bolster local sourcing, and production will be competitive.
Toyota plans to use the clout of its cooperation with partner Suzuki Motor (SZKMY - Free Report) and reap the benefit of the latter’s low-cost engineering know-how and mild hybrid technology.
Toyota's first new hybrid to hit India’s roads will be the Urban Cruiser Hyryder, a compact SUV with a price expected to be around $25,000, which is less than half the price of the Camry. Suzuki and Toyota together will sell the Hyryder.
That would make it a contender to the popular midsize combustion-engine SUVs by Hyundai Motor Co. (HYMLF - Free Report) and Kia Motor. However, the Hyryder will have an advantage as it will be 31% more fuel efficient than the Hyundai and Kia diesel models, offering 28 km per liter (65 miles per gallon), a key metric for India’s buyers.
To bring down the cost, a hybrid system originally developed for subcompact cars, or one size smaller, will be used. This combination will result in an SUV that will be on par with or slightly cheaper than Toyota’s renowned Prius sedan, which starts at $25,000 in the United States.
There remains a cost differential of $3,400 between Toyota's full hybrid and its comparable gasoline car in India, which is higher than the typical differential of about $2,000 for Toyota in most countries.
To boost sales in India's price-conscious market, Toyota will also sell Hyryders with a mild hybrid powertrain supplied by Suzuki. This is a departure for Toyota, which has always favored full hybrids. The shift is a reminder that the automaker has been unable to scale down the cost of full hybrids to compete in a market like India. But again, it reflects Toyota’s strategy differentiation per market needs.
Toyota's second hybrid for India will be a multi-purpose vehicle, or people-carrier, expected later this year or early in 2023, per sources.
Taxation is another concern that affects the vehicle’s price in India, which levies taxes of 43% on hybrids – similar to gasoline or diesel SUVs and far higher than the 5% tax on EVs. Toyota has been trying hard to get a tax reduction but has not yet been successful.
Hybrid powertrains should align with the India administration’s drive to boost local manufacturing.
Also, as India tightens fuel efficiency and emission targets for carmakers, hybrids will help Toyota meet its regulatory requirements as credits earned will offset the production of fossil-fuel vehicles.
At the Toyota Kirloskar Auto Parts factory in Bidadi, an industrial town near Bengaluru in southern India, the automaker's joint venture with its parts affiliate Aisin Seiki Co and India's Kirloskar Systems has begun, and the plant is manufacturing E-Drives for the Toyota Hybrid System. It is manufacturing the Hyryder at its Bidadi, which has an annual capacity of 200,000 cars.
Toyota believes the Bidadi factory will be a local supply chain for the EVs it eventually plans to bring to India.
The plant can make an enormous number of 135,000 E-Drives a year on one assembly line and has the potential to raise that to more than 400,000 by adding two more.
The project is anticipated to save costs in double-digits in percentage terms compared with imported systems.
It is indeed a huge project for Toyota, but it is determined to execute it deftly as this may spur its electrification success in the country.
Shares of TM have lost 9.8% over the past year compared to its industry’s 28.6% decline.
Harley-Davidson has an expected earnings growth rate of 6.9% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised 8.5% upward in the past 30 days.
Harley-Davidson’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed in one. HOG pulled off a trailing four-quarter earnings surprise of 49.52%, on average. The stock has declined 1.3% in the past year.
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Toyota (TM) Alters Hybrids Strategy in India to Capture Market
Toyota Motor (TM - Free Report) recently announced that it is rebooting its strategy for India by doubling down on a bet that emerging markets will generate demand for hybrids if provided at the right price.
Toyota’s hybrid Camry sedan performance, since its India debut in 2013, has not been impressive. Sales numbers for the vehicle have remained low partly due to a sticker price that was more than eight times the annual income of a middle-class family in the country.
Now, the Japan-based auto giant is keen to play the game differently with lower-cost hybrids. It intends to bring down the cost of full hybrid powertrains by manufacturing them domestically in India.
Toyota's fossil-fuel hybrid-dependent strategy in India is a misfit with that of other global rivals who have paced up efforts to roll out pure EVs. Thus the hybrid bet is an acid test for Toyota’s success in the sub-continent.
Usually, hybrids are cheaper than EVs as they have smaller batteries and do not rely on charging stations. These factors are key parameters in markets like India where customers are price sensitive and charging infrastructure can be weak.
Per media sources, Toyota wants more first-time buyers in India to own full hybrids as initial steps toward mass electrification. Gradually it would bolster local sourcing, and production will be competitive.
Toyota plans to use the clout of its cooperation with partner Suzuki Motor (SZKMY - Free Report) and reap the benefit of the latter’s low-cost engineering know-how and mild hybrid technology.
Toyota's first new hybrid to hit India’s roads will be the Urban Cruiser Hyryder, a compact SUV with a price expected to be around $25,000, which is less than half the price of the Camry. Suzuki and Toyota together will sell the Hyryder.
That would make it a contender to the popular midsize combustion-engine SUVs by Hyundai Motor Co. (HYMLF - Free Report) and Kia Motor. However, the Hyryder will have an advantage as it will be 31% more fuel efficient than the Hyundai and Kia diesel models, offering 28 km per liter (65 miles per gallon), a key metric for India’s buyers.
To bring down the cost, a hybrid system originally developed for subcompact cars, or one size smaller, will be used. This combination will result in an SUV that will be on par with or slightly cheaper than Toyota’s renowned Prius sedan, which starts at $25,000 in the United States.
There remains a cost differential of $3,400 between Toyota's full hybrid and its comparable gasoline car in India, which is higher than the typical differential of about $2,000 for Toyota in most countries.
To boost sales in India's price-conscious market, Toyota will also sell Hyryders with a mild hybrid powertrain supplied by Suzuki. This is a departure for Toyota, which has always favored full hybrids. The shift is a reminder that the automaker has been unable to scale down the cost of full hybrids to compete in a market like India. But again, it reflects Toyota’s strategy differentiation per market needs.
Toyota's second hybrid for India will be a multi-purpose vehicle, or people-carrier, expected later this year or early in 2023, per sources.
Taxation is another concern that affects the vehicle’s price in India, which levies taxes of 43% on hybrids – similar to gasoline or diesel SUVs and far higher than the 5% tax on EVs. Toyota has been trying hard to get a tax reduction but has not yet been successful.
Hybrid powertrains should align with the India administration’s drive to boost local manufacturing.
Also, as India tightens fuel efficiency and emission targets for carmakers, hybrids will help Toyota meet its regulatory requirements as credits earned will offset the production of fossil-fuel vehicles.
At the Toyota Kirloskar Auto Parts factory in Bidadi, an industrial town near Bengaluru in southern India, the automaker's joint venture with its parts affiliate Aisin Seiki Co and India's Kirloskar Systems has begun, and the plant is manufacturing E-Drives for the Toyota Hybrid System. It is manufacturing the Hyryder at its Bidadi, which has an annual capacity of 200,000 cars.
Toyota believes the Bidadi factory will be a local supply chain for the EVs it eventually plans to bring to India.
The plant can make an enormous number of 135,000 E-Drives a year on one assembly line and has the potential to raise that to more than 400,000 by adding two more.
The project is anticipated to save costs in double-digits in percentage terms compared with imported systems.
It is indeed a huge project for Toyota, but it is determined to execute it deftly as this may spur its electrification success in the country.
Shares of TM have lost 9.8% over the past year compared to its industry’s 28.6% decline.
Image Source: Zacks Investment Research
Zacks Rank & Key Pick
TM carries a Zacks Rank #4 (Sell), currently.
A better-ranked player in the auto space is Harley-Davidson (HOG - Free Report) , carrying a Zacks Rank #2 (Buy), currently. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Harley-Davidson has an expected earnings growth rate of 6.9% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised 8.5% upward in the past 30 days.
Harley-Davidson’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters and missed in one. HOG pulled off a trailing four-quarter earnings surprise of 49.52%, on average. The stock has declined 1.3% in the past year.