Toyota pulls out of small car race, will focus on bigger ones

Toyota says it will offer a new settlement plan for workers who have refused to join work at Bidadi plant

Amrit Raj
Published13 Apr 2014, 11:56 PM IST
Vikram Kirloskar, vice-chairman, Toyota Kirloskar. Photo: Bloomberg<br />
Vikram Kirloskar, vice-chairman, Toyota Kirloskar. Photo: Bloomberg

Mumbai: Toyota Kirloskar Motor Pvt. Ltd does not plan to enter India’s small car market and intends to focus on bigger cars, said Vikram Kirloskar, the company’s vice-chairman.

The small car market, consisting of models that cost less than 4 lakh, accounts for 50% of the cars sold in the country but few manufacturers have been unable to enter this segment. The sub- 4 lakh category includes cars such as Maruti Suzuki India Ltd’s Alto and WagonR, and Hyundai Motor India Ltd’s Eon and i10.

The game plan for Toyota in India has changed, Kirloskar said.

The cheapest model that Toyota offers to Indian customers is the Liva hatchback, which is priced at 4.80 lakh (ex-showroom, Delhi).

“Mass market segment is not for Toyota. I think Toyota’s game will be in bigger car segments such as Corollas and Innovas segment. We have tried hard to break the cost-barrier in the small car segment but we have just not been able to do so,” he said.

A consultant said that it’s a big admission from the Toyota vice-chairman.

“I think it’s a very big statement made by the Toyota vice-chairman,” said Anil Sharma, a senior research analyst at IHS Automotive. “It also indicates what their strategy is going to be. It means focusing on pedigree business for more margins. But questions will be raised if they are giving up too early on small car segments.”

Toyota’s move to focus on bigger cars will fetch them more margins and profitability, Sharma said.

Kirloskar said that Toyota has a clear plan for India and a slew of new models will be introduced in the near future.

“Toyota will bounce back into the game very shortly. We have a lot of models coming in. If you have studied our journey so far, it has always been cyclical,” he said.

During the last fiscal year, Toyota in India has seen its market share decline as rival Honda Cars India Ltd saw its sales rise after it introduced Amaze and a feature-rich new City. Toyota India, in which the Kirloskars have an 11% stake, saw its market share decline by 1 percentage point to 5.18%. Overall sales of its vehicles declined 22.2% to 128,811 units in a market which declined by 6% during last fiscal.

Toyota plans to launch two new models—new Corolla Altis and Etios crossover—in the next two months and Kirloskar is worried about the order back-log of these two models as his plant at Bidadi, Bangalore, is going through labour trouble.

On 16 March, the company declared a lockout at its plant to ensure the safety of its workers and management personnel. It lifted the lockout on 24 March but protesting workers refused to join work. Toyota management and the company’s labour union have been discussing a charter of demands, mostly related to wages, for the year ended 31 March.

“We hope to end the stalemate by Monday. It has to be done as soon as possible as we have a couple of new models to be launched during June and July. We already have order backlog for those models, even before we announced the prices for these products. So, we don’t want to be caught on the wrong foot,” he said without disclosing the pre-booking orders for these models.

Toyota Kirloskar Motor will offer a new settlement plan for its workers, said Vikram Kirloskar.

According to Toyota’s offer, the workers will get an increase of 3,100 in their monthly pay for the year, which is less than the demand made by at least 4,100 workers of Toyota’s workers’ union.

“The union demanded an increase of 8,000 per month, which is illogical when workers’ salaries are already in the range of 38,000 and 44,000,” Kirloskar said.

Toyota, which has market leadership in the MPV segment with its Innova, has two manufacturing facilities in Bidadi that have a combined annual production capacity of 310,000 units. The plant manufactures models including Innova, Fortuner, Corolla, Camry and Etios. It employs about 6,400 people, including those in managerial roles. About 15 suppliers and ancillary units also employ around 3,000 people.

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First Published:13 Apr 2014, 11:56 PM IST
HomeIndustryManufacturingToyota pulls out of small car race, will focus on bigger ones

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