Toyota Kirloskar posts 3rd consecutive loss since FY12

Japanese carmaker Toyota?s Indian subsidiary posted its third consecutive loss in the country on the back of economic slowdown in the domestic market and poor demand for its vehicles.

Toyota Kirloskar, a joint venture between Toyota and the Kirloskar Group, widened its net loss to R62.9 crore for the fiscal year ended March 2014 against R6 crore in the previous fiscal. The third consecutive loss for Toyota Kirloskar since FY12 comes in after many years of success in the Indian subcontinent.

The carmakers? net sales declined 11.2% to R13,216 crore at the end of FY14 compared with the year-ago period.

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?Toyota raised capacity from 1.5 lakh units in 2011 to 2.1 lakh units in 2012 and then 3.1 units by 2013 to accommodate new products. Both Etios and Liva have not matched sales expectations, and the capacity utilisation is still very low. Unless Toyota is able to successfully ramp up sales, the cost pressure will continue to hurt its bottomline,? said Yashesh Mukhi, Auto Analyst, Morgan Stanley.

Toyota?s troubles are not alone though as the overall passenger industry declined 6% to 2.5 million vehicles in FY14 as compared with a year ago period. However, Toyota?s volumes declined far more than the industry levels to 22% in FY14 to 128,811 vehicles.

At the end of FY14, Toyota finished sixth place in the passenger vehicles segment, trailing behind Honda Cars India and Tata Motors.

What did not work in the company?s favour is the rising competition and its foray in the small car and the entry level sedan space with the Etios and the Liva. Toyota launched the entry level sedan in December 2010 and the hatchback was introduced six months later. Profit margins in this segment are far lower than the bigger cars that the company used to sell in the domestic market.

Further, in March 2014, Toyota declared a lockout at its Bidadi plant in Bangalore with about 6,400 workers impacted.

?In light of EBITDA break even inspite of tough market condition and exposure to compact segment is seen as a credible performance,? said Pramod Amthe, auto analyst, CIMB.