10 Years of Profit in Just 1 Year: Toyota’s 66% Sales Boom and 4 Key Success Factors

Toyota Kirloskar Motor, Toyota’s Indian subsidiary, had a remarkable year, with profits reaching levels typically achieved over a decade. Sales rose by 66% year-on-year, and operating profit surged to nearly Rs. 6,000 crore—a 2.5-fold increase. 

This impressive growth highlights Toyota’s ability to align with market demand and optimize its operations, making FY24 a major milestone in the company’s journey in India. Here’s a look at the main factors driving this impressive financial achievement.

*All figures are in crores.

Rising Demand for SUVs and Premium Vehicles

In recent years, Indian consumer preferences have shifted significantly toward SUVs and premium vehicles, categories where Toyota has a strong presence. Models like the Toyota Fortuner, Innova Crysta, and new entrants in the hybrid segment have resonated well with Indian buyers seeking high-performance vehicles.

Key Points:

• Toyota’s SUV models are popular for their durability and performance, aligning with consumer preferences.
• Premium vehicles offer higher margins, contributing to a substantial increase in profits.
• Introducing hybrid models has positioned Toyota as an innovative and environmentally conscious brand.

4 Key Factors Behind Toyota’s India Business Success

Established Models Drive Revenue

Toyota’s classics, like the Innova and Fortuner, continue to drive substantial revenue, and regular price hikes push their ex-showroom prices higher. 

Key points:

• Increased Prices: Toyota’s popular models, the Innova and Fortuner, have seen substantial price increases since 2018, pushing their price ranges higher and boosting revenue.
• Sales Growth: Domestic sales of the Innova and Fortuner grew by 32% and 56%, respectively, from FY18 to FY24, reflecting sustained demand.
• Revenue Share: These two models make up around two-thirds of Toyota’s revenue in India, with the rest coming from rebadged Suzuki models.
• Cost Efficiency: With costs rising slower than revenue, Toyota’s revenue from these models has fueled the company’s impressive profit growth.

Source: ET Prime

Expanding with Suzuki Partnerships

Toyota’s collaboration with Suzuki has brought rebadged Suzuki models, including the Toyota Glanza, to the Indian market. These models have gained popularity and even outsold Toyota’s traditional models in recent months, enabling Toyota to reach a broader audience.

Key points:

• Strategic Partnership with Suzuki: Toyota’s collaboration with Suzuki aligns with its “Make in India” goals, particularly in the high-volume and electrification segments. Together, they hold a 55% market share in India.
• Expanded Product Line: Since rebadging the Maruti Suzuki Baleno as the Toyota Glanza in 2019, Toyota has introduced four rebadged models. These vehicles now outsell Toyota’s original models, making the brand more accessible and affordable.
• Price Positioning and Profitability: Rebadged Suzuki models, priced between Rs.7 lakh and Rs.20 lakh, complement Toyota’s higher-end models. Toyota’s premium image lets it charge a slight premium on these models, enhancing profits for both brands.
• Enhanced Dealer Offerings: The alliance broadened dealer offerings, allowing them to cater to a wider customer base, from compact cars to luxury models, helping retain lifelong customers within the Toyota lineup.
• Attracting New Customer Demographics: The rebadged models appeal to younger buyers seeking affordable, sporty options with Toyota’s brand reputation. This has added new segments to Toyota’s customer base.
• Rapid Product Expansion: Toyota quickly expanded its lineup without high R&D costs, capturing more market share and boosting sales momentum in India.

Success with Hybrid Technology

Hybrid technology is also a major factor in Toyota’s success. Models like the Urban Cruiser Hyryder, which feature hybrid solid options, cater to India’s growing interest in eco-friendly and fuel-efficient vehicles. 

Key Points:

• Shift in Consumer Perception: Toyota has successfully changed how Indian customers view hybrid vehicles, starting with the Innova petrol hybrid introduced in December 2022.
• Strategic Product Transition: Toyota paused sales of the diesel Innova Crysta for three months, encouraging customers to consider the new hybrid Innova. As a result, hybrids, such as the Urban Cruiser Hyryder, gained substantial traction, making up 23% of Toyota’s FY25 sales.
• Meeting Emission Goals and Customer Demand: Hybrids align with Toyota’s future emission strategy and prove that Indian customers are willing to pay for advanced technology. A hybrid Fortuner is also planned.
• New Market Positioning: The Innova Hycross has shifted its perception from a fleet to a premium personal vehicle, allowing Toyota to capture new customers. This repositioning also increases profitability, as the top hybrid model commands a higher price than the diesel variant.

Expanding Market Presence

Toyota has increased its distribution network, especially in tier-III and tier-IV towns, as well as rural areas. This expanded footprint has boosted Toyota’s visibility and consumer trust. 

Key Points:

• Increased Distribution Network: Toyota has significantly expanded its showroom and service center presence in tier-III and tier-IV towns and rural areas, boosting consumer confidence in the brand.
• Rural Market Strategy: While Toyota has targeted rural markets for some time, this focus has grown stronger in the last 2-3 years, supported by dealer feedback.
• Promotional Discounts: During the festive season, the company offered discounts on its vehicles, including Rs.30,000 off on the Fortuner and Rs.100,000 off on certain Innova Crysta variants, marking a shift from its premium brand positioning.
• Alliance Synergies Driving Growth: The Toyota-Suzuki partnership contributed to a 37% growth in Toyota’s dealership network from FY20 to FY24, with increased competition in the utility vehicle market helping both brands thrive. Source: ET Prime

Several other factors contributed to Toyota’s business success. Let’s examine these factors more closely.

Benefiting from Government Policies and Incentives

India has introduced various incentives to foster the adoption of cleaner and more sustainable vehicles. Toyota has adeptly positioned itself to benefit from these government initiatives, making it a preferred choice among environmentally conscious consumers.

Key Points:

• Government subsidies on hybrid vehicles reduce costs for consumers, driving sales.
• Policies promoting cleaner technology favor Toyota’s hybrid models.
• Regulatory support enhances Toyota’s profitability by reducing production and tax burdens.

Lean and Cost-Effective Operations

It well-known lean manufacturing system, the Toyota Production System (TPS), is vital in keeping operational costs low and efficiency high. By continuously refining its processes, Toyota maintains high-quality standards while controlling expenses, directly impacting profitability.

Key Points:

• TPS minimizes waste, optimizes inventory, and improves efficiency.
• Cost-effective operations increase Toyota’s profit margins without compromising quality.
• Streamlined production processes help Toyota meet rising demand quickly and efficiently.

Strong Brand Equity and Customer Loyalty

The company’s longstanding reputation for reliability and quality has built a loyal customer base in India. This brand equity ensures repeat customers and contributes to higher resale values for Toyota vehicles, reinforcing the brand’s desirability and driving more sales.

Key Points:

• Strong brand loyalty results in repeat purchases and customer referrals.
• The reputation for durability enhances the long-term value of its vehicles.
• High resale values and quality assurance attract new and loyal customers.

Impact of Global Supply Chain Constraints on Competitors

The company’s robust supply chain management has allowed it to mitigate challenges that affected other automakers. By maintaining close ties with suppliers and adhering to just-in-time (JIT) production, Toyota could deliver vehicles without major delays, capturing market share lost by competitors facing supply issues.

Key Points:

• Efficient supply chain management helped Toyota avoid production delays.
• JIT production minimizes inventory costs and keeps operations agile.
• Toyota capitalized on supply disruptions among competitors to capture additional market share.

What Lies Ahead

Toyota’s recent success demonstrates its adaptability and understanding of the Indian market. Looking forward, Toyota plans to continue investing in hybrid technology, expand its local manufacturing capacity, and introduce more models that cater to evolving Indian consumer preferences.

Toyota’s Upcoming Product Launches in India

• Fortuner’s Strong-Hybrid Powertrain (2025)—The Fortuner with a strong-hybrid powertrain is scheduled to be launched in early 2025.
• 2026 Milestones for Toyota – The e-Vitara, a rebadged Suzuki product, is expected to arrive in India by early CY2026.
• Other Expected Launches (2025-2026) include the Corolla Cross SUV, a smaller Fortuner hybrid, and the Landcruiser Prado. Source: ET Prime

Toyota’s Research and Market Strategy

• Extensive Pre-launch Research – Toyota conducts in-depth research to ensure new products are produced in manageable volumes and meet customer demands.
• Challenges with Previous Launches – Despite this approach, past models like the Etios (2010) and Yaris (2018) struggled in the Indian market.
• Reliance on Established Models—Toyota has relied on successful, older models like the Innova (2005) and Fortuner (2008).

Conclusion

Toyota’s ability to earn ten years’ worth of profits in just one year shows its smart strategy, flexibility with market trends, and focus on efficiency. By meeting India’s rising demand for SUVs and hybrids, improving local production, and building strong brand loyalty, Toyota has set a high standard for profitability in the Indian auto market. 

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