 "Naomi Ishii, Toyota")
Toyota, the world's largest car maker, is facing a rough ride in the Indian market, thanks to the temporary diesel ban and an increasing shift towards petrol vehicles. Naomi Ishii, managing director, Toyota Kirloskar Motor, tells Ajay Modi how the events in India are a new learning for the company and necessitate a relook at strategy. Edited excerpts:
As a global player, how do you read recent events like the diesel engine restriction in the National Capital Region (NCR) and advancement of the schedule for BS (vehicle emission) norms?
I lost the trust of my headquarters in Japan because of the sudden change of stance, particularly the diesel ban. I have been explaining to my headquarters that this has occurred not only because of uncertainties but as Delhi is one of the top polluting cities in the world. I am trying to convince (headquarters in) Japan to look at the reason. Now, they realise the issue.
Toyota is not a company that only wants to make more cars and sell it. By utilising Toyota's technology and business practice, we must solve the problems a country faces. Toyota can learn once again from the events in India. We need to go back to our basics.
What is our real objective? Toyota should step ahead. We have the technology. We can't avoid regulations. To meet BS-VI (norms) in 2020 is a huge challenge for new and existing cars. There might be a small loss of business for us due to this. We have to go with it.
How do these events change your strategy?
We have to follow the regulations. If we can't, we should stop some of the business. If we cannot comply with BS-VI on existing models like the Etios, we will have to stop selling it. To comply with BS-VI, we don't only need installation of a component into a car. We need to change everything. A car consists of thousands of parts. Each will require a new design and localisation. All manufacturers are impacted. We need to relook at the strategy. Take the case of the petrol Innova that we now want to bring. It was not in our plan before December, though we were successfully selling the petrol variant in other countries.
Your focus in India has been sedans and SUVs. That has not helped in growing your market share. Will you look at the small car market?
There are so many customers of competitors who want to buy a Toyota but we lack a product line and they end up buying other brands. We have a responsibility to offer more choice. We see some possibility in the small car segment from that point. We are working very hard to streamline the priorities. If Daihatsu (recently taken over by the parent firm) can be utilised to meet the demand, we should do it. Compared to Toyota, Daihatsu is very good at designing the small car and manufacturing a cost-competitive vehicle. We have to study this area carefully and some decision should be taken.
Toyota has a technological edge in hybrid (vehicles). What scope do you see for hybrids, given the recent action against diesel?
The cost of hybrids is still very expensive. To popularise and gain acceptability, we need to lower the price. To do so, localisation is one tool. But, to localise a hybrid, we need volumes. Otherwise, we take a huge risk. As in Japan, if the Indian government can subsidise some portion of the cost, we might be able to boost the sales of hybrids. The Camry hybrid is around Rs 30 lakh and demand is limited. We need to have a more affordable price range. If we want to introduce an Etios hybrid, the petrol price is Rs 7 lakh and the hybrid would be Rs 11 lakh. Will you buy? We have to get some government support.
The fuel efficiency of a hybrid is double that of a conventional engine. That allows a 50 per cent reduction in fuel consumption. The real problem is pollution and to solve that, something has to be done. Unfortunately, a fraction of the issue has been addressed by banning diesel vehicles in the NCR. Other global players are seeing this as an illogical decision.
What three things will keep you busy in 2016?
The diesel ban is a big headache. The company and its dealers are in a pitiable situation. One of our dealers in the NCR gets 80 per cent of sales from the Innova and Fortuner. You can imagine the impact on him from the sudden order. If this continues, a huge impact will be there. I hope the new Innova will change the perception about Indian cars.
I hope this time the BS-VI discussion will be the final one and we can plan strategy for the future.
How is the R&D (research & development) role of the Indian set-up changing?
To be a top player in this country without having a prominent R&D function might be very difficult.
We have to work more closely with our suppliers. Every single part requires designing. We have to keep sharing information with Japan and get feedback. All these take time. Local R&D will become increasingly important.
