The Delhi diesel engine ban (size bigger than 2000cc) has affected various companies, including Toyota. In fact, as much as 8% of Innova sales and 14% Fortuner sales come from the Delhi market. However, the company has taken enough steps to ensure that its dealers haven’t been negatively affected. N Raja, senior vice-president and director of Marketing & Sales, Toyota Kirloskar Motor, says that the company not only took back the inventory, but is also supporting the affected sales staff at dealerships until the ban gets lifted. In an interview with FE’s Vikram Chaudhary, he adds that there is a rising consumer interest in the Etios and that the company would like to go in hybridisation in a big way. Excerpts:
What are the reasons that both the Innova and Fortuner are so successful in India?
The primary reason is that both these cars fully meet customer expectations—as an MPV and as an SUV, respectively. Both are value-for-money products, have low cost of ownership, their engine life is the best in the segment, and their resale value is high. A three-year-old Innova, for example, doesn’t lose more than 30% of its original price when you retail it in the second-hand market. Interestingly, only 30% Innova sales come from the institutional segment, while 70% are personal-use cars. The Fortuner enjoys 70% market share in its segment, and is going strong despite new launches by the competition.
Both the Etios sedan and the Etios Liva hatchback, we believe, are equally good products. Why did they fail to attract customers?
With the Etios—which we launched in 2010—we have had a lot of learnings. The traditional Toyota strengths are engine and transmission, lifecycle, low cost of ownership, etc; however, in the entry-level sedan segment, Indians also particularly look at fancy exterior design, and the Etios perhaps didn’t meet some customer expectations in that area. Similarly, the Etios Liva—launched in 2011—wasn’t initially able to attract substantial customer interest. However, as Indians have started realising the inherent strengths of both these cars, they have started showing more interest by the year. The sales of Etios Liva, in fact, grew 12% last year compared to the year earlier.
But close to 35% Etios sales come from the fleet market…
In general, taxicab branding is considered negative for a product. However, the case of the Etios is different. For example, we have had Etios as taxis that have covered over 2 lakh km and are still running as good as new cars. When we do customer meets, we display such proven cars, and when the customer sees the product, the very fact that it hasn’t aged speaks volumes about the car. We still have challenges, but the Toyota DNA has gradually started supporting the product.
To what extent has the ban on registration of vehicles powered by diesel engines over 2000cc in Delhi affected Toyota?
About 8% of Innova sales come from the Delhi market, which is about 700 units per month. The Fortuner has been hit harder—north India is an SUV belt and Delhi forms about 14% of Fortuner sales. But we have taken steps to ensure that our dealers haven’t been negatively affected. The ban was enforced suddenly on December 14, and our dealers from the affected region obviously had the inventory. We knew that the ban was until March-end and the dealers cannot afford the inventory for so many months, so we took back the vehicles that came under the ban, as also the accessories of these vehicles. We also bore all the ensuing transportation costs.
In addition, the ban affected manpower. The salespersons and workers who specifically serviced these vehicles were suddenly left without work. So we promised the dealers that until the ban gets lifted, we would pay the salaries of the affected staff. We are still paying. In fact, we work closely with our dealers, and this gets reflected in the fact that we have won the JD Power dealer satisfaction awards for the last five years in a row.
Did the affected dealers witness sales of other Toyota products rising?
Yes, the dealers from the region witnessed a gradual rise in sales of some other products, such as the Camry Hybrid. So we provided them these products on a priority basis, so that the overall sales loss gets minimised.
Toyota has a lot of hybrid vehicles in its global portfolio. Do you plan to launch some of these in India?
Instead of looking at bringing an all-new hybrid car to India, we might look at introducing hybrid variants of the cars we already have in India. For example, the Corolla has a hybrid variant in the global markets, which can make sense in India.
In India, the upper B-segment has cannibalised the sales of C-segment vehicles. Upper B-segment SUVs have also hit the sales of C-segment sedans.