‘The new Toyota plant can produce any car’

Toyota Kirloskar Motors is set to strengthen its position in the premium sport utility vehicle market with the launch of the new Land Cruiser, even as it prepares to launch its ‘strategic small car’ in early 2011. The small car will be built on a completely new platform and rolled out from its new facility near Bangalore, which can also produce sedans and other cars, Sandeep Singh, deputy managing director (marketing), TKM told Neha Rishi of DNA Money. Excerpts from the interview:

On investments in India
We are making an investment of Rs 3,200 crore on our second plant, where the small car will be manufactured. It might even go down to Rs 3,000 crore as the investment is directly related to the capital good cost or material cost.

On models the new plant can produce
It can manufacture any type of car, right from a compact car to a sedan to a multi utility vehicle. Initially, we will manufacture the compact car. The platform is ready for any car.

On production capacity of the new plant being reduced to 70,000 units from 100,000 units earlier
In December last year, when the market was declining, we decided we have a capacity of 65,000-70,000 units in our existing plant where we are producing Corolla and Innova. So we thought let this continue, as initially the plan was to shift the production of Corolla to the new plant, but then we decided against it, thereby reducing the capacity of the second plant.
The second plant, when ready, will be a huge plant capacity wise, and we will, in future, produce many more cars from here. In future, ramping production from 70,000 to 100,000 will not be a problem at all.

On pricing of the small car
There has been wrong news floating in the media. Those who have reported this have been making their own assumptions. We have never talked about the price of the small car. The small car will be available in gasoline.

On powertrain facility for the small car
As of now, we have no plans for powertrain facility for the small car. We have TKAP (Toyota Kirloskar Auto Parts Pvt Ltd) as of now for powertrains, which could be used for Fortuner. On the small car, we are looking at localisation levels of minimum 70%, otherwise we may not be competitive in the market.

On Yaris coming to India
Yaris never came here for testing, contrary to the reports in the media. I have not seen Yaris as a model lying in our factory for test. Even a few years back, there was a talk by Daihatsu to launch a small car, and Daihatsu doesn’t make Yaris. Yaris is made by Toyota. So there was never a plan to bring Yaris to India; it could never have come and nobody could have even imagined, because if you want to talk about the cost parameter, the kind of features that are there in Yaris, we can’t give those in India.

On Prius coming to India
Toyota is a leader in hybrid technology and the future lies there. But whether that kind of product will sell in India? Whether the time is right? No. But will it come to India? I think it will come very soon, because it is directly linked with the price. If tomorrow the government says it wants to promote green technology and give special benefit, then we will be the first one to bring the car to India.
The government should give incentives for the hybrid cars, because not many manufacturers will be bringing hybrid vehicles now. So we are trying to push hard that if you want to promote green technology, the government has to give some special incentives, or the cost will not be attractive. We are looking at reduction in custom duty.
On hybrids, there is some relaxation.
In Europe, if you buy green technology car, you save a lot of money. Today, on the custom duty and cess, we are paying about 36% on CKD (completely knocked down) kits. If the government reduces the duty on the CKD kits, that will really help us.

On competition from Xylo
We had reduced our production. But with the launch of the new Innova, we saw that the demand had suddenly gone up. Today, there is a waiting period of at least four weeks on Innova and three weeks on Corolla. So I don’t think Xylo has impacted us so much. Now we have four car manufacturers operating in one segment and another one comes, so obviously the market share will go down. But are we losing sleep on that? No, because we are very clear, if the customer wants to buy Innova he will not go purchase Xylo. Our differentiator is quality, reliability and dependability.
We will not reduce the price of Innova as there is a waiting period and we have to jack up production to meet the demand. We are catching up on market share as well. But we cannot go up to the same level of 36% because you have another manufacturer that has been added to the segment. If you study Mahindra and Mahindra sales, the Scorpio sales have actually gone down by 50%, so entry of Xylo has impacted their own product. But it cannot impact Innova. They are two different animals altogether, as the quality levels and platforms of these two products are different.

On Innova as a multi utility vehicle 
That’s what Innova is for us, which is actually getting into personal car category. When we launched Qualis, it was launched as a premium vehicle. After 3 years, we started selling into fleet and Innova is getting into that segment already, but is getting into the premium fleet category. Still, almost 85% of Innova sales is as a personal vehicle or for corporate use.

On the semi-rural and rural markets
We are very strong in these markets. Now we are going to penetrate deeper, as that is where the market lies; that is where you will get high volumes.

On the response of these markets to Corolla
Gradually Corolla sales are improving. We may not be able to meet the target as the market has dropped by 38%, but we are meeting our target in terms of market share.