Toyota invests Rs14,000 crore in second Indian plant to make small cars

India's car population may be growing but the growth is mainly concentrated in the small car sector, and not without reason. With increasing interest rates making buying cars costlier and the government slapping new duties on larger vehicles in addition to the existing favourable tax regime for smaller cars, even premium players are wading into the small-car scene. (See: Government squeezes fuel-guzzlers, imposes extra tax on large vehicles)

Indian passenger car sales rose by 11.79 per cent between April 2007 and March 2008 to 1.2 million units. Competition in the small car segment is set to increase in 2009, with planned launches by Maruti Suzuki (A-Star and Splash), Honda (Jazz) and as yet unnamed models from Ford, GM and Volkswagen. (See; Ford planning petrol and diesel variants for small car in India and GM to produce second small car, cheaper than Chevrolet Spark)

Japanese carmaker Toyota, all set to surpass General Motors as the world's largest, is the latest entrant when it made its intentions clear on the occasion of the laying of the foundation stone for its second factory in India.

The decade-old Indian joint venture of the Japanese automaker, Toyota Kirloskar, is building its second plant at Bidadi, about 40 kilometres from India's IT hub of Bangalore, with an upfront investment of Rs14,000 crore ($329 million) to manufacture a range of passenger cars and multi-utility vehicles. Toyota is the majority partner with an 89-per cent stake with Kirloskar owning the rest.

On Thursday, Karnataka chief minister B S Yeddyurappa unveiled the foundation stone for the new plant that will have a test track and additional space for suppliers and other vendors. The ceremony was attended by Toyota senior managing director Akira Okabe, chairman Ryoichi Sasaki, vice-chairman Vikram Kirloskar and managing director Hiroshi Nakagawa.

The modular plant, to be commissioned by 2010, will have an installed capacity of 100,000 units annually and will employ about 2,400 people. Top officials confirmed that the company will soon be introducing its newly designed compact car in the Indian market.