Toyota is gearing up for a tough fight in the Indian SUV space. Know how

SUVs and Nex Gen cross overs are clearly hot on demand in the Indian market this year. After a slew of carmakers who announced their new offerings in these segments, Japanese car major Toyota said it too plans to drive in a compact SUV and a sub Rs 10-lakh premium sedan in India as it failed to meet customer expectations through the Etios range.

Toyota has twice failed in meeting its double-digit market share target due to slower growth in models like Etios entry sedan and Etios Liva in volume-laden lower-priced segments. The company operates in India through a joint venture with the Kirloskar family.

Naomi Ishii, MD of Toyota Kirloskar Motor, said the company does not intend to make a splash in the small-and medium-sized segment in the range of Rs 3-7 lakh. In this segment, providing safer, low-emission and high-technology vehicles at prices comparable to competitors like a Maruti, Hyundai and Tata Motors is a challenge. The immediate focus will be on segments that cater to the "affluent middle-class" buyers through a "fashionable sedan" and a "compact SUV."

"We could not meet various customer demands through Etios," Ishii told TOI after the company drove in hybrid and petrol versions of the new Camry sedan, priced at Rs 31.92 lakh and Rs 28.8 lakh, respectively (both ex-showroom Delhi).

Toyota has managed a 5% market share in India despite being present since 1999, and Ishii said the target of double digits is still being pursued, though the focus is on utilizing the installed annual capacity of 3.1 lakh units, only half of which is being used now.

The company finished 2014 with sales of 1.32 lakh units, around 9% lower than 1.45 lakh units sold in 2013 and far lower than 1.72 lakh units sold in 2012. The company has been witnessing a growth in volumes (year-on-year) over the past few months, though this is due to a lower base and a minor revival in the overall buyer sentiment.

Ishii said there are "several options" before the company as it re-works its India strategy and these include some of the models that are already doing duty in other markets. Vios is being considered for the under Rs 10 lakh range and the car — which has been found testing on Indian roads — will be a rival to models like Honda City, Hyundai Verna and Maruti Ciaz.

In the compact SUV, 'Rush' is being looked at very seriously though work needs to be done to tune the car for Indian conditions and ensure that it has a diesel heart, considering its popularity with the buyers.