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Toyota Motor plans to build a third car plant in India, expanding production capacity in the country for the first time in over a decade as its partnership with Suzuki Motor boosts domestic volumes, two sources said.

The world's biggest car maker wants the plant to start with capacity of 80,000-120,000 vehicles a year, which could grow to around 200,000 over time, said one of the people who has direct knowledge of the plans.

The plant's proposed initial capacity would expand Toyota's existing manufacturing capacity in India by as much as 30% from 400,000 units currently.

Toyota has also begun development of a new sport utility vehicle (SUV) for the Indian market that would be launched in early 2026 and be an anchor product for the new factory, said the person and a third source briefed on the company's plans.

The sources declined to be identified as the automaker has not disclosed the expansion plans.

A representative for Toyota's India unit declined to comment.

Toyota's India sales have soared due to a global partnership with Suzuki under which the two Japanese car makers take some vehicles originally developed by their partner, then tweak and sell under their own brands to fill out their product line-up.

Cars originally from Maruti Suzuki's stable such as the Glanza hatchback and Urban Cruiser Hyryder SUV now account for 40% of Toyota's India sales.

About two-thirds of Toyota's current production capacity is used by Maruti Suzuki to build vehicles for both car makers as part of their partnership.

Toyota, known for its Fortuner SUV and Camry hybrid in India, told Reuters earlier in September it expects record domestic sales in 2023.

The Japanese car maker is now aiming to have production capacity of 500,000 vehicles per year before the end of the decade, including the car models it will supply to Suzuki, said two of the sources.

INDIA GROWTH

Toyota's expansion in India, the world's third-largest car market, comes at a time when it is seeing slowing growth in markets like Europe and North America and competition in Southeast Asia from Chinese players.

It currently has two car plants in Bidadi, a town in the southern Indian state of Karnataka, and the third one is being planned at the same premises. It added a third shift at the two plants in May, raising their combined annual capacity by 30% to over 400,000 vehicles.

The new C-segment SUV, codenamed 340D, that Toyota is working on will fill a gap between its mid-sized Urban Cruiser Hyryder and bigger multi-purpose vehicle Innova Hycross, two of the sources said.

It is working with suppliers to produce 60,000 units a year when it launches in early 2026, they added.

Toyota is also looking at introducing a "mini" Land Cruiser in India, they said, though added the car maker is not forecasting a large amount of sales and has yet to make a final decision. If Toyota does decide to press ahead with the model, parts would be imported for assembly in India, they said.