Toyota plans to build a new plant in India and to sell small cars in the country for the first time, according to a news agency report.

“We need to go into that kind of segment,” Atsushi Toyoshima, Toyota’s managing director in charge of India, told Bloomberg News last week. “Without that, Toyota can’t be a substantial player in the market. That’s very clear.”

The news agency said the automaker has just 0.7% of India’s passenger car market as it only sells Corolla and Camry sedans, costing about twice as much as the country’s average car.

It plans to introduce smaller models as it seeks to win a 10% share of a market likely to grow 15% annually for the next 20 years, Toyoshima told Bloomberg.

“To succeed in India, a small car is critical,” said KK Mital, chief investment officer at New Delhi-based Escorts Asset Management, told the news agency. “A sedan as the heart of the market is quite a while away.”

Bloomberg said Toyota has boosted its share of India’s car market from 0.06% in 2003, when it first set out its goal of getting a 10% share by 2010. It has a 20% share of the utility-vehicle segment with the Innova.

The automaker hasn’t decided where it will build the new plant, which smaller models it will sell in India or when, Toyoshima told Bloomberg News in an interview at the company’s only factory in India, near Bangalore.

Toyota’s passenger car sales fell 22% in the 11 months ended February from a year earlier to 6,530, according to Society of Indian Automobile Manufacturers data cited in the report. Sales of its Innova and Prado vehicles gained 17% to 32,166.

Bloomberg News said almost three-quarters of the cars sold in India are minicars with engines of 0.8 liters or compact hatchbacks with engine of 1.4 liters or less.

Most cars sold in India – where the local Suzuki unit dominates with half of sales – are priced below 400,000 rupees ($US9,000), almost half the price of Toyota’s locally assembled Corolla sedan, the report noted.

Toyota’s last new model was the ‘emerging markets’ Innova multi-purpose vehicle in February 2005.

“We have time at Toyota to introduce models, so I am still aiming at achieving a 10% market share,” Toyoshima told Bloomberg News.

Toyota denies ‘concrete’ India plant plans