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0 To 33 In 10 Years By 2010, Toyota wants to make a million vehicles and rule over a third of the Indian passenger car market. Just how? BT brings you the inside story. By Suveen K. Sinha
It takes a good 45 minutes over undulating roads from Bangalore to get to Toyota Kirloskar Motors' (TKM) plant tucked away in the dusty industrial estate of Bidadi. And if you aren't alert, you are likely to miss the narrow road off the highway that takes you inside to the 436-acre unit that the Japanese car giant built three years ago. Painted in stark white, the facility itself is unpretentious and built for functionality; four security guards at the entrance keep an eagle-eye over people going into and out of the plant, and not a soul is sauntering inside the compound. Take the elliptical logo off the front factory wall, and it could be anybody's automotive unit.
But that's just the way the secretive car major likes it: quiet, unobtrusive, but single-minded and thorough. Besides, when you are plotting a revolution, it makes sense to be very discreet. Mandarins at New Delhi's Foreign Investment Promotion Board got a taste of that last August when an application from TKM landed on their table one morning. The company had sought an approval to manufacture and sell cars in India. Everything was in order, except that the application did not mention what kind of a car it wanted to make, or even reveal its name, except for tagging it 679N. When summoned by the flummoxed bureaucrats, TKM's canny executives were disarmingly polite, but volunteered little information. Still, the approval came through. When word got out that TKM-a one-horse company, focussing only on a 15-year-old multi-utility vehicle (MUV), Qualis, brought in from the Indonesian market-was getting into cars, the industry went into a tizzy. For, it was because of its own choice that the $121-billion Toyota, which has $20 billion in reserves, was staying out of the passenger car market in India. And if the car major-No. 1 in Japan and No. 4 globally-did decide to gird up its strategy and enter the six-lakh-a-year market, the industry equations would change dramatically. Want to know just how seriously its competitors and investors take the 64-year-old company? Take a look at this: if you added the market capitalisation of the world's three biggest car makers-General Motors, Ford, and DaimlerChrysler, in that order-Toyota's at $105 billion would still be one-and-a-quarter times more. ''It's a giant stirring,'' whispers a Delhi-based rival reverentially. As BT went about prying open Toyota's gameplan for India, meeting the company's tight-lipped top executives in Bidadi, and rivals and industry experts all over India, what emerged was an amazing story of one company's audacious bid to slowly, but systematically, dominate the passenger car market in India. Some numbers from that daring plan: by 2010, TKM wants to make and sell 1 million vehicles a year. The idea? Lord over at least a third of the car market. Its range of vehicles will include a sub-compact, a sedan, a luxury car, and may be a new MUV to replace Qualis. A significant percentage of the vehicles will be exported. Its topline then would soar to a staggering Rs 40,000 crore. Admits Jagdish Khattar, Managing Director, Maruti Udyog, the market leader: "Toyota's entry into passenger cars will present fresh challenges for all of us." For a perspective, consider where TKM is today: with Rs 1,100 crore in revenues last year, it has a minuscule 5 per cent share of the overall auto market. It employs just 1,400 people and works only two shifts at a plant built to manufacture 50,000 Qualis a year. Yet, if nobody's laughing at Toyota's grand plans it's because it is, well, Toyota. Says Sachio Yamazaki, Managing Director, TKM: ''In 1957, Toyota was manufacturing only as many vehicles as we are planning in India this year. By 1967, the company was producing one million vehicles per year. That is the benchmark we would like to follow here in India.'' Coming in late to an emerging market and then stealing a march over competitors is nothing new for Toyota (See From Laggard To Leader). But what should worry Yamazaki is the fact that in no other market has Toyota entered this late-when already a dozen players are in the fray. Still, as Hormazd Sorabjee, a Mumbai-based auto analyst, points out: ''It would be foolish for rivals to take Toyota's plans lightly. It comes with a huge, huge reputation.''
On A Long Haul Two years ago, when Toyota brought in a 15-year-old dead horse Kijang and dressed it up as Qualis for the Indian market, competitors thought that may be for once the industry samurai was committing a harakiri. After all, that was the time when Ford had launched a peppy, made-for-India Ikon; General Motors had brought in its compact Corsa from the Opel stable, and even Hyundai had aggressively come in with its 1.5-litre Accent. The sceptics couldn't have been more wrong. As they quickly realised, Toyota had done its homework thoroughly and had picked a segment where competition was the weakest. Tata Engineering led the market with its mini-truck-turned-MUV, Sumo, and Mahindra & Mahindra's Armada was a distant second, with no apparent ambitions of leading the race. A market starved of choice and quality, lapped up Qualis (See Beautiful Ugly Duckling). Sure, Sumo held its own during 2000-01 (the first full fiscal for Qualis), selling 25,706 vehicles, a 3 per cent growth over the previous year, compared to 25,373 of Qualis. But this year it is a different story. Qualis has been clocking more than 40 per cent share of the market in most months. At the end of last month, it had already sold over 21,000 this calendar year, compared to Sumo's monthly average of about 2,000. That could, however, be due to a slowdown in the commercial segment of the MUV market, where domestic players-Tata Engineering, M&M, and Bajaj Tempo-have a much larger play, while the Qualis remains a favourite in the personal segment. ''But for the slump in commercial segment, we would have retained our position,'' says Rajiv Dube, General Manager, Commercial (Passenger Cars), Tata Engineering. Despite it's heady success, Toyota would do well to keep its head this time round. For, unlike the MUV segment, the passenger car market is choc-a-bloc with offerings. At last count, there were some 32 basic models and 129-odd variants vying for the customer rupee. Besides, competitors such as Maruti Udyog and Hyundai have the advantages of a headstart and localised manufacturing. More importantly, they are consolidating their positions by expanding their product range. While it certainly won't be impossible for Toyota to find a toe-hold in whatever segment it wants, the room for strategic manoeuvring will be severely limited. Its investments at Bidadi today are just over Rs 700 crore. That, however, is no reflection of Toyota's future commitment to the market. Listen to Yamazaki talk and you will hear words like 2020 and 2030 (those, of course, are years). Why, the 50-year-old has even planted Japanese rice in a small paddy field inside the plant, and next to that in a pond he is breeding fish-Japanese again. ''I am a farmer at heart,'' he quips. Pretty soon, though, Yamazaki's pond and rice field will get hemmed in by a mass of concrete and steel. At the moment, TKM occupies just 110 of the 436 acres that it has. Since its manufacturing systems are modular, TKM only has to plonk down sets of assembly lines as and when its requirements grow. That's when the ''farmer'' will turn into the most feared automotive CEO in the country. And that, Yamazaki promises, will be soon. |
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