Head of India’s Toyota Kirloskar on Complex Mission

MUMBAI – Toyota Kirloskar Managing Director Naomi Ishii’s long-term plans for the Japanese automaker’s Indian joint venture go beyond simply selling more cars.

During his nine months on the job Ishii has surveyed the Indian market and presented Toyota management with analyses and recommendations. Strategies have not yet been finalized, but they will reflect Ishii’s application of what is called the Toyota Way – a managerial and production philosophy grounded in the principles of continuous improvement and respect for people.

Ishii’s vision for Toyota in India does not ignore market realities: The automaker’s Rs180 million ($2.9 million) loss in 2013 was its first in its 18 years in the country. Light-vehicle sales tumbled 17.5% from a peak 172,241 in 2012, and the 2013 decline was followed last year by a 6.6% backslide.

Sales jumped 36.2% in the January-April period compared with the depressed levels of year-ago,

but Ishii already is looking ahead to Toyota’s role in the Indian market in 2020 and beyond. His conviction is that defining the automaker’s role in India will determine the size of its business in the country.

Ishii wants Toyota to actively contribute to solving challenges facing India. This includes improving automobiles’ fuel economy, reducing pollution in cities and reducing the number of road deaths. The assumption is that an automaker that helps in solving these problems will increase sales and market share.

One solution, Ishii believes, is to develop a small, inexpensive B-segment car within a year. He recommends that it be a hybrid, a field in which Toyota’s technological expertise is overshadowed by questions about how to effectively market such a car in India.

The locally produced Camry hybrid, priced at Rs3.4 million ($54,850), has sold in low volumes since its August 2013 launch. That same year, Toyota introduced the low-cost, conventionally powered Etios and Liva small cars, whose quality problems have made them unattractive to buyers. Indeed, as Ishii himself admits, “They tarnished Toyota’s brand image in India.”

Ishii also wants Toyota to have a voice in India’s complex regulatory and taxation structures. “India has five to 10 times more regulations than Thailand or Indonesia,” he says, noting the government has five different tax brackets for cars, SUVs and multipurpose vehicles.

Such multiplicity lowers India’s competitiveness both in local and export markets. With these complicated laws and high taxes, automakers need three to four years to plan and produce new models or introduce new technologies. In many cases regulations and taxes have been changed on short notice by the time the updated vehicles and technologies are ready.

Toyota is calling on the government to adopt simple and long-term standards, regulations and tax regimes. That would enable all automakers to offer the best of their products within a short lead time and at competitive prices.

Ishii, however, rules out raising sales volumes by discounting prices. “We are selling premium products,” he says, convinced that discounts undercut Toyota’s efforts to restore its reputation for quality.

Toyota cars are relatively costly because 30% of their parts are imported and subject to high tariffs. The goal is to raise the level of localization from the current 70% to more than 90%, including engines, as Honda and Ford have done in India.

A significant part of Toyota’s sales strategy is increasing its presence in rural areas, where No.1 automaker Maruti Suzuki makes 35% of its sales and No.2 Hyundai, 15%. Toyota would aim for 40%, Ishii says.

Looking beyond growing market share, Ishii wants Toyota in India to become a global supply base for Asian, African and South American countries. “We are educating Toyota top management to look into these possibilities (saying), ‘Do not look at the Indian market in terms of numbers but as Toyota’s supply base in the decade to come,’” he says.

Ishii sees his mission in India as applying the Toyota Way to more than building better cars: “Toyota’s global philosophy of continuous improvements refers not just to the car features, but also to better ways of doing business.”