Betting big on India, joint-venture Toyota Kirloskar Motor Private Limited is setting up its second factory with an investment of Rs 3,200 crore to produce compact cars. Hiroshi Nakagawa, managing director of Toyota Kirloskar Motor, spoke to FE’s Saikat Neogi about the company’s India plans and future of small cars in India. Excerpts:
What kind of new models are you showcasing in the forthcoming Auto Expo in Delhi?
We will display around 14 production and concept vehicles, including our low-cost compact car, at the Auto Expo in Delhi. The compact car has been conceptualised especially for India. We are also working on plans to showcase Toyota Prius hybrid at the expo.
How much potential do you see in the small and compact car market in India and how do you plan to tap it?
The small car segment is very good in India and nearly 75% of the demand is in the small car segment. At present, Toyota has no product in the small car segment and we are likely to create a small car for the Indian market. We would take a year to put things in place and by the end of 2010 we will start production in India. We plan to roll out 70,000 units of the proposed compact car in the first year of production. We will also look at the export market because there is a big opportunity there. But currently, our main focus will be on the domestic market and we will concentrate on it for the small car segment. If you succeed in a competitive market like India, then you will succeed in the overseas market, too. We also see a great potential for the hybrid car market in India as the government is keen on low-emission cars.
How much are you investing in India at the moment?
We are investing Rs 3,200 crore in a second factory at Bidadi near Bangalore, which is the same place where we have our existing factory. The first factory was set up in 1997 with an investment of Rs 2,000 crore.
How much of your global sales are out of India?
India contributes around 3-5% of Toyota’s global sales and we plan to take it to 10% in the next few years. Our plan is to become an important and long-term player in the Indian market.
Do you think that there are too many players in the Indian auto industry?
All the global auto manufacturers are very much interested in the Indian market and this market will grow significantly in years to come. The Indian market is expanding and there will be much more investment in the auto industry in the near-future. That’s the reason why you see all auto majors lining up investments in India and planning big. All the global majors are introducing new brands in India and getting very positive response. With many players in the market, it is a good learning process for manufacturers. Customers are also getting a good choice at competitive rates. Also, a tough market will make us more competitive and focus more on quality and pricing. So, at the end it is a win-win situation for all ?manufactures, dealers and buyers.
India is aiming to become a global hub for auto component industry. What all does it call for?
At this moment the component industry in India is at its developing stage. In the near future, many of the vendors will reach international levels in India, but for that they will have to focus on quality products and look at innovation. In fact, all the major auto companies that are operating in India will look at localisation for their component sourcing and that will drive the market in the country. Auto companies must help component manufactures to improve on quality.
What are the challenges that you are facing in India?
There are quite a lot. For us customer satisfaction is very important and we take that as a challenge. We have to satisfy the customers and build Toyota into a strong brand. The other challenge is to create good products and maintain quality for which we are known worldwide. Toyota Production System is our guiding principle and we do not compromise on that and our workforce in India is well trained to adopt the system.
