But concerns on a strong Yen remain.
Its status as the country’s seventh largest carmaker apart, Toyota India has retained the number one position in the country for bringing out zero-defect vehicles -- an achievement that has gone to it for the past two years.
However, that hasn’t prompted Toyota Kirloskar Motor Pvt Ltd to ignore its issues. The Bangalore-based company is concerned about the strengthening of the Yen and other currencies against the Indian rupee, as it still imports components such as the engine and those related to transmission. These alone consumed around Rs 180 crore of the auto major last financial year.
For three years, Toyota’s made-in-India vehicles have been rated number one within Toyota global. The Aichi-headquartered parent company has 50-plus manufacturing plants across the world, including in developed and developing countries, besides its native Japan.
“We are bullish about the quality of the Indian workforce,” said Shekar Viswanathan, deputy managing director of the Indian subsidiary. “All we have to do is to create a right environment for them to work.”
The statement gains relevance, given that Toyota had faced a strike in its Bangalore plant in 2006. According to Toyota’s global quality team that goes across the plants and randomly check the products, the cars manufactured by Indian workmen in Bangalore plant are of zero defects.
Having been in operation in India for 13, years the company has managed to build a good relationship with the workers, he claimed. Incidentally, up north, Maruti Suzuki, the country’s largest carmaker, is just through with a second round of labour unrest it faced at its production plant in Haryana’s Manesar.
Today, what is affecting the company most is not labour problems, but rupee depreciation and high interest rates, Viswanathan said. Rupee is depreciating against most currencies, especially the US dollar and Japanese Yen. These factors will hit the profitability of the companies, he added.
“For instance every Re 1 depreciation against the dollar means a hit of Rs 600 million (Rs 60 crore) hit for Toyota India.
In the last fiscal, we witnessed a depreciation of Rs 3; it means we have taken a hit of around Rs 180 crore till now, considering that we are importing certain components.”
When components are imported from Japan, the appreciation of the yen is a cause of concern. For instance, a car like Innova is produced in India with half of its parts imported.
Components sourcing will go up by 33 per cent to Rs 600 crore in three years — from Rs 450 crore last year. To address the problem some of the rise in costs are passed on the interest rates to the customers, he added.
For Toyota, the focus is clearly the developing countries. After all, “developed markets including Japan and the US are growing very slowly. So, the growth is flat or negative. For Toyota as a group, India, China and Brazil are very important markets”, he said.
Toyota’s 2013-14 sales target for India is 3.10 lakh units. For the current fiscal, it is 1.50 lakh units. The company will look at launching new variants in the existing products, including Innova. Currently Innova is the highest selling product for Toyota in India, but the company believes Etios will overtake it sooner than later.
Toyoto India’s current production capacity of Innova is 70,000 per annum. It will be increased to 90,000 by 2012-13, thus leading to a drop in the waiting time. The company has already announced setting up of a petrol engine plant in Bangalore. It will be later manufactured by Toyota Kirloskar Auto Parts, a joint venture between Toyota Motor, Toyota Industries Corp and Kirloskar Oil Engines Ltd.
“We will have an initial capacity of 100,000 engines per annum starting in the third quarter of 2012 and about 240,000 transmissions a year from early 2013,” said Vishwanathan.
