Labour unrest and marketing challenges hurt the carmaker’s attempt to achieve the top three ranking in India
In 1998, when the world’s largest passenger car company, Toyota Motor Corporation (TMC), opened its factory in Bidadi, about 40 km from Bengaluru, it was seen as a big moment in the history of the Indian automobile industry.
In 2000, the joint venture company between TMC and the Kirloskar Group launched a multi-purpose vehicle (MPV), Qualis, which became a runaway success. Six years later, they pulled the plug on the Qualis, even as sales peaked.
In its place they brought the Innova — a more stylish, modern car — which, after initial hiccups, became a huge money-spinner and remains so even today.
Encouraged by the success of the Qualis, the joint venture had set itself an ambitious target of capturing 10 per cent of the domestic automobile market by 2010. Almost 22 years later, the target remains elusive even though the company has launched a slew of models in nearly every segment of the car market.
Without referring to the target, Vikram Kirloskar, Vice-Chairman, Toyota Kirloskar Motor (TKM), says the company has always focused on producing safer, environment-friendly cars. “Our focus has not been on volumes or chasing numbers but on selling safer, ever-better and environment-friendly cars and retaining leadership in segments in which we have created a niche for ourselves, like the MPV or SUV [sports utility vehicle] segments.”
Auto analysts, on the other hand, ascribe several reasons for the missed target. “A sense of complacency had set in for the company after the Innova and Fortuner SUVs turned out to be huge successes. A lot more effort should have gone into marketing its mid-size cars, especially Etios,” says a former executive of the company.
Amidst much fanfare, Toyota Kirloskar launched its mid-sized car Etios and the hatchback Liva in 2010 after conducting several trials. It also announced an investment of around ₹3,200 crore for the production of these cars and a few others at its second plant, also in Bidadi. A decade later, TKM pulled the plug on these cars, too, claiming they didn’t meet the country’s pedestrian protection norms that would kick in from October 2020.
The carmaker was unwilling to make the additional investments needed to meet these norms, as it was readying to launch the rebadged versions of Maruti Suzuki cars around this time. The first of these models, Toyota Glanza, a rebadged Baleno, was launched in June 2019. Toyota next plans to launch the rebadged versions of Maruti Suzuki’s Ertiga MPV and Ciaz sedan. Vitara Brezza has already been launched as Urban Cruiser in September 2020.
Critics say a reason why the Etios and Liva failed to make a major dent in the market was the company’s decision to sell them to the cab/fleet segment, which reduced interest among personal car buyers.
However, Shekar Viswanathan, a former vice-chairman of TKM, contends that neither the lack of BS-VI standards nor its deployment as taxis had affected the success of the Etios. “As a product, it was a success. You can build volume by selling cars at a loss but that is not a smart thing to do,” he argues.
Carmakers in India have very little control over the pricing and, if they want to build volume with profit, they have to decide at some stage whether they want to continue doing this, he says. “The size of the Indian car market is a big attraction for global car manufacturers who have the technology; but if there are other markets that offer a better valuation for your products, the tendency will be to go where you can possibly get better returns,” he says.
Strife on the shop floor
Another major problem that has continued to hurt Toyota’s operations in India are the frequent labour strikes at its factory in Bidadi. The longest was the four-month strike that ended in March this year. According to some former senior employees that BusinessLine spoke to, TKM’s rigidity in its dealing with floor-level employees was to blame, since some amount of sensitivity in their handling would have been enough to iron out the differences.
Viswanathan disagrees. “As in any assembly of persons, there is a small coterie that really does not need this job and it is primarily they who are the troublemakers. But I remain confident that, with the right counselling, a majority will see the futility of their adversarial stance,” he says.
What could eventually turn the tide in favour of Toyota in India is its global “capital alliance” with Suzuki Motor Corporation, with its many layers meant to protect the interests of both partners.
While Toyota expects to benefit from the cross-badging, which allows both to manufacture vehicles for each other, Suzuki expects to get access to Toyota’s strong technical know-how to develop hybrid and electric cars.