Toyota India Product Push Aims to Rebuild Share

MUMBAI  – Toyota Kirloskar is working to bring consistency to a hit-and-miss product lineup that claimed a 3.1% share of the Indian market in 2014, down from a peak of 5.2% just two years earlier.

The automaker’s Rs1.8 billion ($29 million) loss last year was its first in 18 years of operating in India. Light-vehicle sales fell 9% to 132,778 units in 2014 after dropping 18.6% in 2013, according to WardsAuto data. This followed a growth spurt in which deliveries more than tripled, from 54,320 in 2009 to 172,241 in 2012.

Toyota India’s most profitable products have been the Corolla sedan and Qualis and Innova MPVs. But the automaker has failed to achieve the volumes of small- and compact-car market leaders Maruti Suzuki, Hyundai and Tata, or utility-vehicle specialist Mahindra & Mahindra.

Its own small-car offerings, such as the Etios sedan and Liva hatchback were not competitively priced owing to a low level of parts localization and the need to import relatively costly components, exacerbated by the depreciation of the Indian rupee against the U.S. dollar. Etios and Liva sales fell about 20% in the fiscal year ending in March 2014 and another 14% since then.

The automaker lost customers not only because of price but also quality problems. “In hindsight, everything we did seems wrong,” Vice Chairman Vikram Kirloskar says.

Toyota India is responding by reshuffling top management; refocusing on the Toyota Way, the parent company’s principle of continuous improvement; fully implementing in its Indian plants the cost efficiencies of the Toyota Production System; eliminating discounts on list prices; and freezing executive salaries.

The aim of these measures is to lower break-even volume from the present 225,000 units to a more attainable 125,000-150,000.

Also being addressed is the fact that Toyota India has not introduced a new model since 2010. “We have checked the damage, but there is yet no strategy to become an important player in India without a small car,” says Managing Director Naomi Ishii, former chief product planner for the automaker’s Japanese parent.

Toyota India has launched a new-generation Innova in celebration of its 10th anniversary  and an all-wheel-drive Automatic Fortuner in the premium segment. Both offer low-cost maintenance, suspensions strengthened for India’s bad roads, high fuel efficiency and a 3-year, 60,000-mile (100,000-km) warranty.

Launching in a few months is the Hiace, a new, 10-seat premium MPV targeted for hotels and schools. It will be imported as a completely built-up vehicle but local content is being increased in the Innova, Fortuner, Corolla and Camry in order to lower their prices; the goal is 90%

Ishii wants to introduce hybrid models in India, a segment in which Toyota is the global leader. “We really want to promote hybridization. Right now we have the Camry hybrid. Even though the sales numbers are really small, they are picking up. We need to introduce some small models here.

“The challenge is to understand the diversity of Indian market in which customers want a choice from a variety of models, segments and prices,” Ishii says. “This is quite unlike (the) homogeneity in the Japanese market.”