MUMBAI – Toyota Kirloskar launches its first volume hatchback, the Etios Liva, this week.

The 5-door, entry-level B-car joins Toyota’s popular Innova cross/utililty vehicle and premium Etios sedan in the Indian market, both of which have been selling more than 4,000 units each month. The Etios sedan has been on a 6-month waiting list since early this year.

The Liva uses the Etios platform and promises to sell as well or better than the sedan, as it is priced affordably and goes bumper to bumper with small-car market-leader Maruti Suzuki. “We are starting a price war,” says Sandeep Singh, deputy managing director of Toyota Kirloskar.

The Liva with a 1.2L gasoline engine is priced at Rs399,000 ($8,900). The coming 1.4L diesel version likely will base at Rs599,000 ($13,300). The cost of most 5-doors in the comparable segments range from Rs430,000 to Rs800,000 ($9,600-$18,000).

A change of product mix and strategy has lifted Toyota Kirloskar from a marginal performance in the three years leading to 2009 into rapid growth since then. In 2010, according to Ward’s data, the auto maker’s total light-vehicle sales rose 37.5% to 83,184.

In the first five months of 2011, car deliveries, alone, soared 342% to 20,155 units. Including light trucks, Toyota Kirloskar saw an overall rise to 45,370 sales. This, despite one month of production cuts, due to the parts shortage following Japan’s earthquake and tsunami in March.

“We are looking at ending the year by selling 140,000 units,” says Managing Director Hiroshi Nakagawa. “This would translate into growth of 65%-70% over last year.”

Before the production cuts, the goal was 150,000 units.

Toyota Kirloskar is investing an additional Rs3 billion ($67 million) to increase manufacturing capacity, and Nakagawa places the 2012 sales target at 210,000.

The auto maker still has waiting lists for its products: one month for the Etios sedan, two months for the Fortuner SUV and three months for the Innova.

Toyota Kirloskar claims the success of the Etios platform is due to its higher fuel efficiency, low maintenance and reliability. The entry-level Liva has the latest in technology and design, says Singh, while achieving 43 mpg (5.5 L/100 km).

The auto maker now is striving for greater domestic content. The Corolla and Fortuner source 50% of their parts locally and the Innova is at 60% Indian content. The Etios already sources 70% parts locally and next year it will feature locally built engines. Transmissions also will be built in India starting in 2013, raising the local sourcing to 90%.

With the launch of the Etios Liva, Toyota Kirloskar now is shifting its focus to the volume market. “(The) Liva will overtake Innova in popularity,” Singh predicts.

Adds Hiroji Onishi, Toyota’s Asia/Pacific president who traveled to India for the hatchback’s launch: “(The) Liva has been designed focusing on Indian customers’ aspirations.”

Ford India in the next few days will unveil its new Fiesta here and General Motors will debut the Beat diesel, putting Toyota Kirloskar under further price pressure.

“Developed countries have a limited growth potential,” Nakagawa says. “Our hope for the future lies in emerging countries like India.”

The managing director concedes the rate of growth has slowed in India. But, he says, strong demand still exists for the right kind of product, and Toyota Kirloskar sees opportunity with its product range that now covers all the segments.

The auto maker already has the Corolla Altis, Camry and Prius in the executive and premium segments. And it has plans to bring in the Lexus luxury car, carrying its current momentum into the super-luxury market.

To help drive these efforts, Toyota’s financial arm likely will set up shop here soon.