Toyota to make low-priced cars in India

By Kiyoshi Takenaka and Edwina Gibbs

TOKYO (Reuters) - Toyota Motor Corp said it plans to enter the low-price car market in India, throwing down the gauntlet to rivals such as Tata Motors in the race to win over the nation's millions of cost-conscious consumers.

Tata triggered a fierce battle earlier this year when its unveiled plans to launch the world's cheapest car, the Nano, around half the cost of the current cheapest Indian model from rival Maruti Suzuki India Ltd.

Global car makers -- initially sceptical that Tata could produce such a low-cost car -- are now scurrying to make their own versions in the hope of meeting the needs of consumers in emerging economies such as China and Russia.

Ford Motor Co plans to build a small car in India within two years, while Nissan Motor Co Ltd and Renault aim to build a $3,000 car with Bajaj Auto.

Toyota's 35 billion yen ($343 million) new production facility, to be located on the outskirts of Bangalore, will start output in 2010 with initial capacity of 100,000 units a year, the automaker said on Friday.

Analysts expect the new cars to have a price tag of around 700,000 yen to 800,000 yen ($6,900-$7,850).

"That will not immediately compete with Tata Motor's $2,500 People's cars, though in the future Toyota may jump into the lower-priced car market using Daihatsu's know-how," said Yasuaki Iwamoto, analyst at Okasan Securities.

The move follows its announcement on Thursday that Toyota would almost double its stake in Subaru maker Fuji Heavy Industries Ltd as part of an alliance aimed at more efficiency developing and producing cars.