Average capacity utilisation at India plants was 50% last fiscal; says will first work for bringing discipline on the work floor
Toyota, world's biggest carmaker, is staring at yet another year of losses at its India operations.
The current fiscal could be one of the toughest years for Toyota Kirloskar Motor (TKM) owing to various factors like the economic slowdown, lack of new products, under-utilisation of its existing capacity and labour unrest, according to industry experts.
The average capacity utilisation for the Japanese manufacturer during the last fiscal was around 50% for an installed annual capacity of 310,000 units at its two plants near Bangalore.
The recent month-long strike at company's plant has added to the blues.
Its unionised workers decided to call off the strike on Monday and resumed work on Tuesday this week, after the intervention of the Karnataka government.
Despite the current competitive challenges, the company wants to address the issues step by step. Recovering from the month-long strike, the company is now in the process of bringing more "discipline" on the shop floor.
Talking about the current state of affairs at TKM, Shekar Viswanathan, vice-chairman, TKM, said, "We will take one step at a time. Bringing more discipline within the workmen is at present the need of the hour for us. Once we achieve that, we will take decision on new products and strategy for the market.
"The workers should understand that when the industry is not doing good, it is difficult to pay an additional cost. When we are producing half the capacity, it is clear that there is something wrong. We will be declaring losses for the last fiscal and we will be sharing the numbers," he said.
Viswanathan said the company is looking to raise debt to meet the operational requirements. He, however, did not give details nor specify the exact amount.
The company posted a loss of Rs 6 crore in fiscal 2013. It is yet to announce its financial results for the last fiscal.
"The company probably is going through the toughest time in India," said Puneet Gupta, associate director, IHS Automotive Sales Forecasting.
With an order backlog of 10,000 vehicles owing to the strike, the company, however, is hopeful of resuming normalcy in operations soon.
Car sales have remained under pressure for the past two years owing to the slowdown in the economy and rising fuel prices.
Despite the slump in the market, foreign car makers, including Ford, Nissan Motor and Honda Cars are betting high on the Indian market with higher localisation and more India-specific launches.
TKM, on the other hand, has not seen a big launch post the launch of Etios and Etios Liva in 2010 and 2011.
Even its popular models like multi-purpose vehicle – Innova – and sports utility vehicle – Fortuner – are facing competitive pressure.
As per the numbers by Society of Indian Automobile Manufacturers, company's total sales dropped 22.17% in fiscal 2014 compared with fiscal 2013. While its Japanese rivals are scaling up its operations.
An industry expert, who did not wish to named, said, "Even though the company is going through rough times, its fundamentals continue to be very strong. These are temporary issues that can be overcome."
Gupta of IHS Automotive said, "The company will have to realign its strategies the way Honda did. Even though they have some very good products like Fortuner and Innova, the company should have something in the mass segment. India continues to be a secondary market for the company, while weightage is given to Thailand and Indonesia for exports."
In 2013-14, Toyota sold 55,312 Innovas, down 28% year on year, and 16,551 units of Fortuner were sold last fiscal, up 1.67% over the previous one.
The company is now preparing for a launch of Etios Cross – a sub-4-metre crossover.
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