The Toyota Kirloskar Motor managing director tells Darlington Jose Hector & Ajay Sukumaran why he is not troubled by Toyota?s low market-share, and how his company?s priority is customer satisfaction
The extent of Hiroshi Nakagawa?s tenure in India is best reflected in the fact that he bows little these days and speaks far better English than when he arrived. The Japanese are known to bow even when they attend a telephone, so it?s clear that he has been away from his country for a good period of time now. The managing director of Toyota Kirloskar Motor (TKM) walks into our meeting place at his office, taking a few quick steps and is ready for the interaction without too much delay. Since it?s the start of the day, coffee is ordered.
Nakagawa says he took some time to realise how aggressive Indians have become over the years. ?We Japanese are a little conservative, but the Indians are very aggressive, in a good sort of way. All my Indian friends are,? he said. Toyota?s market surveys indicate that Indian customers invest in the future, not getting caught up in how the economy is at present. There seems to be a great bit of optimism here, he says, which is reflective of Japan 30-40 years ago.
It took some time for him to realise how cost conscious Indians are. ?This was tougher than my original expectations. Initially, the customers seemed to be only worried about cost, but they are now starting to realise the importance of quality. I tell my colleagues that if we can succeed in India, we can easily succeed in other countries!?
When Nakagawa joined TKM five years ago, the company had a very small presence in the market. Now it has moved up to a 6% share, but there is plenty of hard work ahead. The Indian market has been growing for Toyota except for a short period after the Lehman shock. This year again, the pace has been slow. ?Our speed of growth will come down. Not only us, but all car manufacturers are concerned. But we have the Etios and the Liva, and we are aggressive with these models. At the political level there is some strong leadership and I am looking forward to how the situation goes from here. The economy will improve,? he says, taking a long sip of his coffee.
Cookies arrive and Nakagawa wants us to have a good munch. The man who served us coffee and cookies also seemed to have a bit of Toyota efficiency about him. He serves us without interference of any sort and removes the cups and saucers without a hint of noise. “We want all our guys to be well trained,” Nakagawa says proudly. “The Toyota way is a way of life for us.” We are now through with our cups of coffee and having polished off a few biscuits, re-energised to talk about some of the other challenges.
Worries do remain, he says, like the fluctuating rupee, which is impacting Toyota?s profitability by pushing up the cost of imported components. Or the higher demand for diesel cars, which upset production plans for the Etios series as the factory was geared to build more petrol cars and was forced to adjust to the market. The gap between the price of diesel and petrol because of the government?s diesel subsidy is unhealthy, says Nakagawa.
For anyone who is watching from outside, Toyota in India seems to be proceeding at a slow pace. There is criticism that the company walked into the mass segment way too late, but Nakagawa is in no mood to accept that argument. He says Toyota?s approach is very much different from other car manufacturers, which are very aggressive. The Toyota way is a step-by-step approach. ?We cannot train people to a high level in one day, that?s why we concentrate on this approach. Continuous growth is what we are looking at. Compared to the others, it may seem slow-moving but we are proud of this way. Volume-wise it is still very limited, growth-wise we are one of the biggest contributors to global Toyota.?
But isn?t he concerned about comments that Toyota is not aggressive in a fast-growing market like India? Toyota has been in India for over 15 years. ?There are plans,? says Nakagawa. Toyota has two plants in India?the first one has an annual production capacity of 90,000 units and the second plant has a capacity of 120,000 units. ?Now we are expanding the capacity of the first plant to 100,000 and the second one to 210,000. This will be completed by February.?
But still it has to be said that the company?s low market-share is a concern, considering its reputation globally. Isn?t he surprised? ?I?m not surprised. Market-share is a key performance index, a very important figure no doubt. But at the end of the day, market share is not the objective of our business. We would like to create many customers?the so-called happy Toyota customers. We cannot be satisfied only with the product, but we have to ensure that we reach the highest level of service including sales facilities, sales persons, etc, to make customers feel comfortable. That?s our biggest challenge. One of the biggest focus areas is training and education.? Nakagawa says he?s not worried about reaching any particular market-share. He says if you look too high, then you lose balance. ?Just follow the steps and landmarks?that?s the best way.?
He has realised that the Indian market is not just about cost consciousness any more, after taking note of what happened with Tata Nano. The expectation was that people would stop buying scooters and two-wheelers and would opt for the Nano. But that was not the case. ?When I first saw the Nano in the 2008 Auto Expo in Delhi, I was very much impressed. This was a huge challenge and Ratan Tata had realised his dream. After that, when they launched, I was a little bit surprised with the market acceptance. I know that volumes fluctuate month by month, but in totality these volumes did not meet expectations. But recently it clocked 5,000 units in monthly sales. That?s a big figure,? he says excitedly.
Nakagawa asks us whether we want more of his coffee. While we have one more round of the brew, Nakagawa declines his share. We had to now ask him about the Korean surge in automobiles. After all, they were seen as the poor cousins of Japanese cars but their performance in India has been quite stupendous. ?Hyundai has grown very fast. Earlier, there was a very bitter story in Korean people?s history which was quality and design related. But they made a huge effort and tried to overcome these issues. In the past, the gap between Japanese cars and Korean cars was very high, especially on quality. But increasing to a even higher level of quality from an already high level is very difficult,? Nakagawa says, trying to put an end to the probe on ?quality?.
Toyota?s lifeline, he says, is maintaining the quality. Hyundai and others have come close but Toyota will continue to fine-tune its quality levels. ?We want our customers to remain stress free and have no trouble for years. The customer should be able to enjoy a high resale price,? he says. Towards this end, Toyota is bettering its training efforts at individual dealerships. ?We won?t compromise on training and people-related expenses.?
Toyota is currently carrying out a study on the feasibility of bringing its Lexus brand into India. ?We have not yet reached a conclusion. We are trying our best to get the Lexus brand here. Sometime I receive requests from certain customers, especially those from overseas. But the issue is duty-related costs.?