Thinking Bigger Key to Toyota Kirloskar Retrenchment

MUMBAI – The prestige and performance of its models from Camry and Corolla to Etios and Innova have not been enough to insulate Toyota Kirloskar from tough times in India.

Light-vehicle sales by Toyota’s India subsidiary exceeded or matched the industry’s performance since 2010-2012 but have fallen far behind since then.

Industry sales declined 7.8% in 2013 and 10.3% in the first three months of 2014, according to WardsAuto data, but Toyota Kirloskar deliveries plunged 18.7% and 55.8%, respectively, during the same periods.

Pressed to change course, the automaker is forgoing India’s small-car race in favor of restoring sales and market share with its larger, tried-and-tested Corolla, Camry, Fortuner and Land Cruiser.

“Toyota will soon bounce back into the game with this strategy. We have a lot of new models coming in,” Vice Chairman Vikram Kirloskar says, conceding the automaker has not been able to break through the small-car segment’s cost barrier.

Implementing the new strategy is Managing Director Naomi Ishii, who replaced Hiroshi Nakagawa in January. He has been told that he should not think of returning to Japan until he is fully satisfied with the automaker’s progress in India.

Ishii has been given two tasks.

In the immediate future, he must make Toyota Kirloskar’s presence felt in the crucial compact and midsize segments. Specifically, Ishii has tasked with reviving sales of Etios sedan and Etios Liva hatchback by reducing their costs through greater localization. The automaker may aim to increase the local-content level of its Indian products to 90% from the current 70%.

Ishii’s second assignment is far more important: drawing up a growth map for Toyota Kirloskar based on midsize, executive and premium sedans and utility vehicles. That means identifying new products and defining a plan for the future.

Before his India posting, Ishii headed a design team drawing up Toyota’s global roadmap to 2025. Earlier in his career he led development of the Qualis MPV, a big hit during the automaker’s early years in the Indian market a decade ago.

Toyota Kirloskar still boasts operational efficiency in its assembly plants.

Parent Toyota’s principle of kaizen (continuous improvement) is met by meticulously following production standards. Every Etios is assembled in 119 seconds and an Innova is built in 162 seconds. Before a new recruit receives further training he must learn to pick up exactly five nuts and bolts from a box without mistake and without wasting a second.

The operational efficiency of both Toyota plants in India is 95%, almost the same as in Japan.  In a 16.5-hour workday, 744 vehicles are produced.

Rival automakers including Honda, Hyundai, Ford and Tata are designing compact sedans that have automatic transmissions and are less than 157 ins. (4,000 mm) long, putting them in the lowest excise-tax bracket yet featuring six or even seven seats.

Toyota Kirloskar, meanwhile, reveals little about its plans for the Indian market. No concept cars were displayed at the New Delhi auto show in February. Nothing more than a couple of facelifts of its Corolla and Innova and a few niche products appears likely in the next two or three years.