Toyota to scale down spend on new plant

Toyota Motor Corp is looking to bring down the Rs 3,200 crore investment earmarked for its second manufacturing facility in India. The carmaker is also scaling down the initial production volume of the proposed small car to be rolled out from this facility to 70,000 units from 1 lakh units announced a year earlier.

For Toyota, the small car project is of immense importance as this is expected to lead its entry into the volume segment of the Indian car market and therefore, result in increased profitability. The company sold only about 52,000 vehicles last calendar year and is expecting to close 2009 with flat numbers.

However, with the small car coming in either at the end of 2010 or by the beginning of 2011, it hopes to treble sales within the next three years.

The scaling down of investment is being done through various cost savings measures or ‘Kaizen’. Citing the example of a similar cost reduction effort undertaken when Qualis was launched in India, a senior company official said the actual investments were brought down by 15-20% at that time through continuous cost innovation.

To a question on whether this reduced investment and targets reflected any change in Toyota’s reading of the Indian market, senior MD Akira Okabe replied in the negative. “India remains a priority market for us,” he added.

Hiroshi Nakagawa, MD of Toyota Kirloskar Motors India, said though the Indian operations are profitable, “it is not so much. However, compared with the miserable situation that Toyota is in now globally, Indian operations are in much better position”.
He said the small car platform will be used to make both hatchback and sedan and the parent company could eventually consider converting India into a global manufacturing hub. The new facility will have an installed capacity of 2,00,000 units.

While unveiling the mid-priced SUV Fortuner on Monday, Nakagawa said the new vehicle alone should help the company to cross its last year’s sales target of about 52,000 units this year. The car is priced at Rs 18.45 lakh (ex showroom Delhi) and has already generated bookings of 2,500 units since August 1.