Toyota Motor's Indian unit is planning to expand in rural India to boost sales of slow selling compact models, following rivals Maruti Suzuki and Hyundai Motor which do well outside major cities.

The Economic Times of India said the local venture, Toyota Kirloskar, is setting up a rural sales division.

"India is a vast market and to capitalise on the extensive model offerings, we have embarked on a new strategy to go rural," Toyota Kirloskar Motors managing director Naomi Ishii told ET.

"We have chosen our compact model Liva that is an ideal product with a right price and packaging for the Indian rural customers' looking for high-value preposition."

Just a "miniscule" percentage of current Toyota volume now comes from rural markets "which we want to take to double digits in next few years, at par with other carmakers".

Toyota has told dealers to host village roadshows, with emphasis on the carmaker's vehicle quality and service. The company has more than 250 dealerships across India and plans to open more rural outlets in coming months. It would also employ mobile service vans in rural markets.

"Toyota Kirloskar Motor is a serious player and is pursuing different strategies to grab its share," an automotive analyst told ET.

Toyota estimates the Indian passenger vehicle market to double to around 5m units by 2020, and a significant amount of the demand to come from towns and rural markets.

It plans to sell around 40% of its cars in rural markets.

Toyota Kirloskar needs a boost. It booked a marginal 2% gain in sales for the first five months of this fiscal year to 54,539 units, underperforming a market that grew 5%. It has an installed capacity to manufacture about 3,10,000 units a year, but at least half of that is unutilised.