Rough ride for Toyota in India as labour trouble, slow sales hit momentum

Written by Ajay Sukumaran | Bangalore | Updated: Apr 11 2014, 01:22am hrs
After a three-week deadlock, Toyota Kirloskar Motor's management and workers' union are set to meet for the first time at a Karnataka labour department-convened meeting on Thursday, but the road to reviving the Japanese automaker's fortunes in the Indian market has become increasingly rough.

Toyota's presence in the mass segment of compact cars has traditionally been weak, and now it has slipped a rung from its position as the country's fifth largest carmaker, with fellow-Japanese rival Honda outselling it last fiscal. Its progress in India is not reflective of its global standing, with just a few models like Innova and Corolla giving it the punch.

Toyota recently clocked sales of 1 million vehicles in the country after starting production in India in 1999. But it had entered the mass segment only in 2011 while smaller rivals have been quicker with models in that category. Toyota has always pointed at its conservative nature while explaining its strategy in the segment. With the labour trouble likely to increase the waiting periods for existing models, the company will now be under further pressure to protect its market share.

Typically, it takes some time for auto companies to recover once their production schedule is disturbed because of the cascading effect on component supplies, fixed costs and bookings, said Abdul Majeed, partner, Pricewaterhouse Coopers. It will take 2-3 months to stabilise for anyone who goes through this, he said, adding new launches were key in a competitive market. Launches are very critical because you need to keep trying to make sure you are relevant.

Toyota whose plants are producing around half their capacity has so far maintained that the May launch of its Etios Cross is on track. With the current impasse, it has said the waiting period for existing vehicles has gone up to 30-45 days from 20-25 previously.

We have had 15 years of successful operations. Yes, we have had our share of industrial strikes, but we have been able to sit across the table and resolve the problem. This time it seems to be a bit intractable, Shekar Viswanathan, vice-chairman, Toyota Kirloskar Motor, had told reporters at a press conference last Friday.