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Toyota's slow and steady race in India

Hrithik Kiran Bagade, DH News Service, Bengaluru, Nov 26 2017, 22:09 IST

Japanese car major Toyota completes two decades in India this year, scripting a journey that was fast-paced with quicker gear shifts at some points, with a few slower turns at others, while at few points, it encountered roadblocks. But the Japanese carmaker has grown with the times in India, and hopes to tag along with the market environment.

In 1997, the Indian market had just begun opening to foreign car brands. Toyota formed its Indian subsidiary Toyota Kirloskar Motor Private Limited with Kirloskar Group, which took 11% stake in the JV, to set its course in the utility vehicle arena, with the Qualis which came in 2000. Toyota has since commanded a significant share of a few UV segments, adopting a wait-and-watch approach, as it carefully makes its moves in a chequered Indian car market, governed by an uncertain regulatory environment.

"Our journey has been punctuated by happiness. We have customers who're reluctant to leave us. We have sold over a million vehicles in the market. Our Fortuner sees 60% segment share, Innova sees 35% share; segment-by-segment, we enjoy double-digit share across. From the beginning of TKM sales operations until October 2017, the cumulative sales share of Fortuner (including the new Fortuner), Innova, Innova Crysta, and Qualis, contributed to 56% of our total sales," says Shekar Viswanathan, Wholetime Director and Vice Chairman of Toyota Kirloskar Motor (TKM), who is an old hand at the company.

Sharing vignettes of Toyota's Indian years gone by with DH, Viswanthan mentions, "We haven't completed our journey yet. We feel that we are still good to go for another 100 years and more. We intend capturing more of the Indian market and make good products available."

Bangalore beginnings

In 1997, scouting for a credible partner for its India foray, the Toyota Motor Corporation entered into joint venture with Kirloskar Systems, headed by Vikram Kirloskar, in an 89:11 partnership.

Setting up shop through JVs and partnerships is a strategy Toyota adopts globally. "While Toyota has all the expertise in making cars, for knowledge about local conditions, dealing with local governments, and with the public at large, we need someone known from the community. In India, we found an excellent partner in Kirloskar," Viswanathan says.

Almost every foreign carmaker in India went to Sanand or Halol in Gujarat, Talegaon or Chakan in Maharashtra, Oragadam or Sriperumbudur in Tamil Nadu, and Gurugram and Manesar in Haryana. Toyota, as TKM, found an encouraging safe haven in Karnataka, setting up its India headquarters in Bengaluru, along with a sprawling 432-acre manufacturing plant with a capacity of up to 3,10,000 units at nearby Bidadi.

"When selecting a place, it's the decision of the intending investors and JV partners, who study the availability of land, water, electricity, talent, skills, and labour laws at a particular market. Bengaluruhas always had the advantage of technical skills, on which TKM imparted further knowhow. The Karnataka government has always provided us with great support," says Viswanathan.

In 20 years, in terms of production and shipping quality audit (the number of cars that go out to the yard before being shipped to dealerships, and the defects that are detected then), Toyota's India factory is top-notch when compared with the 42 manufacturing facilities it operates worldwide. Also, the facility employs over 90% of its workforce from within the state and has attracted many of its ancillaries and suppliers to come within range €“ further developing the vicinity.

In December 2010, it set up a second 2,10,000-capacity plant to produce the Corolla Altis, Etios, Etios Liva, Etios Cross, Camry and Camry Hybrid, while in 2016, Toyota Industries Engine India opened a plant to make diesel engines for the Innova and Fortuner, thus adding a fillip to localisation.

Toyota's India

Around 70% of the Indian car market is dominated by small cars, which in definition refer to vehicles with sub-4 metre bodies and driving on engines of 1,500 cc or lesser capacities. The Etios and Liva have been termed as Toyota's small cars, but only the latter has passed the test in this regard. Also, the Etios, which is a hit with fleet operators and has seen fewer sales from private buyers, holds a 4% share in its respective segment.

"There've been questions like, 'In every other segment, you've been doing consistently well. But why is it a different story with small cars?'," relates Viswanathan.

The small car segment is extremely competitive, with Maruti Suzuki, Hyundai, Tata, Renault, Datsun, Nissan, Ford, Honda, and Volkswagen, asking for a slice. "We have a crowded market, with the A-B segments dominating customer sentiment. We need to be realistic about what we can achieve in the small car space," he reflects.

Is Toyota giving India its pride of place? Toyota has invested over Rs 6,400 crore till date in the country. The company, which boasts of 130 models in its international stable, is among the top-three players globally, with industry estimates claiming its global sales to increase to around 10.23 million vehicles this year, across 170 countries. The Corolla is one of the world's highest-selling vehicles of all time.

So where does India fit into Toyota's world map? "Toyota has always placed India on a very high pedestal, simply because of its demographic architecture. But it must be noted that Toyota has one of its largest footprints in the US. It has a presence in countries which had policies welcoming foreign investment much before India. Those are developed markets for Toyota, and must not be neglected," Viswanathan says.

Slow start, power on

TKM enjoys a modest 5% market share in India, but it does not want to chase competition.

For the fiscal 2016-17, TKM posted a growth of 11% at 1,42,500 units as against 1,28,500 units in the previous fiscal.

Observing the market with a keen sense of judgement and acumen amassed over the years from global experiences, the company is looking at the path the government is building €“ the mobility of tomorrow.

The Centre is bullish on alternate fuels, and by 2030, it has envisioned an all-electric mobility push. Today, however, there are very few players in the market who are looking in this direction, let alone planning products.

Five years ago, Toyota articulated its 2050 Global Vision, by when it envisages a market teeming with electric cars, hybrids and hydrogen vehicles. "We must be technology-agnostic. The government must encourage all technologies, as there is no surity on which technology will succeed," Viswanathan says, adding that the path to adopt new technologies is transitional.

"The Department of Heavy Industries has been at it for a while now. Through the National Electric Mobility Mission Plan (NEMMP), and in pursuance to the encouragement given to EVs, pure hybrids, and mild hybrids, we were very happy with that roadmap which supported a gradual shift from internal combustion engine vehicles to minimising the use of fossil fuels. We believe that 100% use of EVs will be achieved by 2050, even if 30% of the total population use EVs around the world," he says, ruing, "However, you cannot have discriminatory treatment. Today, (under GST) EVs are taxed at 12%, while hybrids are taxed at 43%."

EVs will typically be used over short distances for city commutes. For longer distances, hybrids are seen as the logical stepping stone for faster adoption of full electrics, clamouring for the need of charging infrastructure.

Just last week, Toyota signed a crucial agreement with compatriot Suzuki to manufacture and sell electric vehicles in India by the turn of this decade. The pact will have Toyota providing technical knowledge for the project, while Suzuki will manufacture the vehicles for India, and also supply to Toyota.

"We look to revolve around the regulatory environment. Toyota is one of the most advanced players in EV technology. But due to a lack of charging infrastructure, we've brought in hybrids, as they offer the advantage of an internal combustion engine for longer drives," reiterates Viswanathan. Is the government ready for the powerplay?

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