Bangalore: As demand for cars drops in India because of rising interest rates and fuel prices, the waiting period of Toyota Motor Corp.’s Etios sedan and Liva hatchbacks has shortened, particularly for the petrol versions. Hiroshi Nakagawa, managing director (MD) of the car maker’s Indian unit Toyota Kirloskar Motor Pvt. Ltd, is also concerned about the strengthening of the yen against the Indian currency, as components such as the engine and transmission are still being imported. Maintaining quality in a cost-conscious market is also a challenge, he said in an interview. Edited excerpts:
You have announced plans to start exporting from India. What is the strategy?
Exports will not be the main part of our business. We are very much focused on Indian customers. Our customers in other countries, like South Africa, have also been waiting for a car like Etios, which is why we decided to start exports. As MD of Toyota India, what concerns me is our financials in terms of currency fluctuations. When we import components from Japan, we are affected by appreciation in the yen. Seventy percent of Etios’ components are made in India, but for a car like Innova, 50% is imported. At any rate, we have to import some components for any manufacturing done here. We want to of course move towards total indigenization, and the plans to start making or assembling engines and transmission here are on track. In the meantime, the impact of currency on such imports can be offset by exports. We start next March, so in 2013, we might see some benefit on this aspect. By exporting, we can satisfy our overseas customers as well as balance the negative impact of currency fluctuations arising out of imports for Toyota India. But there will be a limit on how much we decide to export.
Maintaining a balance: Nakagawa says the firm has to deliver affordable cars that are also of high quality. Photo: Gireesh GV/Mint
How do you read the Indian car market now? Where would you want to position Toyota in this market in the years to come?
From Toyota’s global point of view, India is definitely one of the most important markets. Our established markets like Japan and the US are growing very slowly or not growing at all. For our business to expand in the future, we have to focus on India, China and Brazil, which are the emerging markets. So, in India, we have to expand our production capability, sales network and also increase our number of models, introduce some more new models.
Etios has been a success. What is your thinking about fresh offerings for the Indian market?
We are thinking about that of course, but we have not reached any conclusion. There is not much I can say on that right now. But we have just launched Etios recently and there is still a lot we have to do in its production and sales before we introduce a fresh model.
How do you read the competition in India and how will Toyota differentiate itself from them here?
India is the most competitive market, because of the sheer number of car manufacturers. Also, in terms of customer expectation and demand, and market structure-wise, it’s a tough market. A and B segments comprise 80% of the market. We have to deliver affordable cars that are also high quality. Customer demand is also changing. The balance between cost and quality is tilting towards the quality side, but still affordability is a very important factor.
Why were your initial production of Etios and Liva low in volume? Did you not anticipate demand for these products?
Of course, we expected much demand. But we did not want to compromise on quality for the sake of volumes. Subsequently, we did ramp up volumes.
What are some of the challenges that you face, some concerns that you have about Toyota’s India operations?
Quality is the prime differentiator that Toyota offers. We are very confident of Toyota’s quality. So, our main challenge in India is to maintain that, not only from the final product side, but also in components, sales and service. We have to train our component makers, constantly upgrading their quality. We also have to expand our sales and service network rapidly to keep up with market demand and volumes, while not compromising on quality.
Where do you see global automotive technology and the industry going in the future? What is your take on hybrid cars in the Indian context?
We would like to introduce alternative technology in the Indian market. But, here, when cost is a factor, it can be difficult to offer hybrid technology. We have to make changes at the design stage, in order to introduce new technologies here.
Are there still any concerns with labour issues in your plant here, or is everything sorted out?
One of the challenges in operating in India is labour management. We have had some bitter experiences. But, having operated here for 10 years, we have managed to stabilize in that area, though we are not 100% there yet. We are continuously working on building mutual trust and communication between workers and management. And compared to what others in the industry are facing, we are better.