Toyota Motor Corporation
(NYSE:TM) recently launched its smallest and cheapest hatchback
car, Toyota Etios Liva, in India. Liva has been priced starting at
approximately $9,000 and will compete directly with the likes of
Ford (
F
) Figo, Hyundai (SEO:005380) Santro, and Maruti Suzuki (BOM:532500)
Swift. The small cars segment is the most competitive auto segment
in India, and Toyota's entry into this segment can potentially
yield rich dividends for the company. Toyota sells its vehicles
mainly under three brands: Toyota, Lexus and Scion and competes
globally with automakers like BMW (GR:BMW),
GM
(
GM
), Ford, Honda (NYSE:HMC),
Daimler
(ETR:DAI) and others.
We have a price estimate of $94 for Toyota stock, roughly 15%
above the current market price.
Small Car Segment Largest in India
The small car segment in India is the largest segment in terms
of volumes. Understandably, this segment is also very competitive
with the majority of automobile manufacturers aspiring to enter
this segment with innovative, low priced products. Ford was
recently able to reverse its fortunes in India with the successful
launch of Ford Figo in March 2010 (See Ford's Investment in India
is Paying Off). There are about 45 products that compete in this
segment, compared to around 27 products in the mid-size
segment.
Indian Automobile Market Expected to Witness Rapid
Growth
Indian passenger vehicle sales increased from 1.06 million units
in 2004 to 2.5 million units in 2010, implying a 16% annualized
growth rate. This growth has been driven by an increasing number of
available models, purchasing power, especially by the middle class,
easy availability of car finance, favorable government policies and
growth of used car market. The growth rate for passenger car sales
dropped to 7% in May 2011 due to increasing interest
rates, fuel price hikes, inflation and commodity price rise;
however, most market participants consider these factors temporary.
Over the long term, the Indian automobile market is expected to be
among the fastest growing automobile markets in the world.
Toyota Poised to Grow its International Market
Share
Toyota enjoys a premium brand image in India for high quality
products. We expect Liva has the ability to do the same for Toyota
that Figo did for Ford last year. In just one-and-a-half day
after its launch, Toyota India reported receiving more than
11,000 inquires for Etios Liva with around 1,000 units already
booked. After Liva's launch in India, Toyota can take it to other
emerging markets as well. This will help Toyota grow its
international market share, providing upside to our current price
estimate of $93.90 for Toyota's stock.
You can drag the trend lines in the modifiable charts
above to see the impact of these trends on Toyota's stock
value.
See our full analysis for Toyota
.