Toyota expects to start compact car production at its new plant in India by the end of next year, with initial capacity of 70,000 vehicles a year, a top official said on Tuesday.

The INR30bn (US$630m) plant, the country's second, is being built in southern Karnataka state, where Toyota's first plant is also located, Sandeep Singh, a deputy managing director at Toyota Kirloskar Motor India, told Reuters.

The compact car would be made specifically for India, he said at the launch of a new Land Cruiser.

Toyota, which owns 89% of its Indian venture, had planned to start the second plant with annual capacity of 100,000 units, but this had been scaled down because of the downturn in the auto sector.

"We can easily ramp it up to 100,000 units, when we want," Singh was quoted as saying.

Having cut output at its existing Indian plant by 20% between November and May as demand fell, Toyota is raising capacity to return it to 65,000 vehicles a year, he added.

The plant is expected to produce 4,300 vehicles in June and up to 5,300 units in July, he said.

"The Indian auto market is seeing a recovery. We are expecting great potential from India," managing director Hiroshi Nakagawa told Reuters.

Toyota Kirloskar, which sells the Innova utility vehicle, Corolla and Camry sedan in India, hopes to sell more than 50,000 cars in 2009.

"We would like to maintain what we did last year," Nakagawa said. Toyota sold 51,500 vehicles in India last year.