Discouraged by sluggish domestic car sales and an adverse impact on its profitability because of an unfavourable currency movement, the world?s largest carmarker, Toyota Motor, will shift its India plans to a lower gear.
It does not plan to launch any new model in India at least till 2015-16, said Sandeep Singh, deputy MD for marketing at Toyota Kirloskar Motor (TKM) ? the Japanese firm?s JV with the Kirloskar Group.
Plans to introduce its ?Lexus? luxury brand in India has also been canned after the recent increase in custom duties for imported cars, while the move to set up a local diesel engine plant has been shelved ? even though 80% of demand in models like Etios are for diesel today.
?If market sentiments do not improve, growth will further taper down on the back of lower economic growth. The number of enquiries at dealers have not gone down, but conversions (to sales) have,? Singh said.
?We were studying the feasibility for a diesel engine plant, but the headquarters (in Japan) are not convinced. The government?s confusion over policy is not letting us take a decision and there will be no move at least till the Budget next year,? he added.
Over the next few years, TKM will instead focus on introducing variants of the Etios range, while expanding sales outlets to increase volumes ? from 195 dealers to 230 by March, 2013 as a first step. Volume growth is essential as output across the two plants at Bangalore will go up by 1 lakh to 3.10 lakh units a year from January. The capacity is almost half the 1.7 lakh units sales target for FY13 (up 13% from 1.5 lakh in FY12).
?We will focus on semi-urban and rural markets and will move to 50 smaller cities by March next year. Based on customer feedback, major changes to the Etios is expected in every 4-5 years, while minor changes will happen in about two. It takes four years to establish a product, so believe sales will grow on word-of-mouth publicity ? we?re focussing on a high resale value,? Singh said.
Toyota?s plans to slow down follows the sharp hit it (and other Japanese firms) suffered both on Yen appreciation and rupee depreciation. Many components and diesel engines continue to be imported from Thailand and Japan, reducing the pricing power for the firm in the extremely competitive mass car segment.
?We have particularly come under pressure in the last two months and a decision on next year?s export target will be taken by end of this month. We will export over 20,000 vehicles to South Africa and are looking for other export markets to offset the hit on rupee depreciation,? Singh said.
Interestingly, though a local petrol engine plant started operations in September, a large part of the 1.1 lakh unit annual capacity lies underutilised today. Sector analysts feel that the move to invest in a petrol facility instead of diesel was ill-timed, given the higher demand for diesel cars.