'I have to admit we are not doing very well'

Business Today spoke to Naomi Ishii, head of Toyota's India operations, and Shekar Viswanathan, VC of Toyota Kirloskar Motor, about the carmaker's future plans for India.
Team Business Today        Print Edition: March 29, 2015
Naomi Ishii, head of Toyota's India operations
Naomi Ishii, head of Toyota's India operations

Naomi Ishii, the youthful head of Toyota's India operations, has a young man's candour. But he also sees the big picture. "If we don't do well in India, it will be a big problem for Toyota globally," he said, as he fielded questions - polite ones, but not all of them gentle - from Business Today last September. Shekar Viswanathan, Vice Chairman and Whole-time Director of Toyota Kirloskar Motor, or TKM, as the India unit is called, was at hand to step in for the more non-gentle ones. Edited excerpts:

Q. What has changed since you took charge?

A. I involved workers' leaders in making mid- and long-term business plans. It gave them a sense of ownership. I made a broad plan and asked Indian leaders to come and look at it. In the past, there was no plan.

Q. No plan?

A. I am not talking about the volume target. What kind of a company we want to be is my question to my Indian people. India will become a 20 million [cars a year] market by maybe 2030. If we don't do India and not think of the future, what will happen? Maruti Suzuki's share is now 45 per cent. If they can sustain this market share in 2030, their sales will be eight million. Together with export, it will make them very competitive. What should Toyota do? We have to engage with the Indian people here.

Q. What kind of a company do you want to be?

A. Our competitors are already there. Doing just what they do is not Toyota's way. India as a country faces big challenges: it has to limit fuel consumption. Delhi is more polluted than Beijing. On fatal accidents, it is the worst globally. How can we contribute to solving these problems, instead of just growing sales, is a key element for Toyota. We need to introduce more fuel-efficient vehicles and promote hybrids and safety. The government should support us. There should be no unnecessary taxation.

Q. You started operations in 1999. You ended 2013/14 with 5.2 per cent share of the market. A company like Toyota does not live with 5.2.

A. We are working very hard with our HQ in Japan to come up with a business plan for up to 2020.

Q. Give us a sneak preview.

A. Very difficult. The clear trend is, 20 years back the customer could make an impact on the car market share. Now we have two customers: one the government, and two the real buyer. Regulation is the pace maker.

Q. Everyone operates in the same environment. How will you increase market share? If you are five per cent when India is at 20 million, Suzuki will be at eight million and you at just one.

A. We have to make [the most of] the existing products so we can enjoy a high RoI (return on investment) model by model. We have to enhance our product planning. We are enhancing our sales operation. We were number one in the JD Power sales satisfaction survey. We overtook Maruti. We are number one on dealer satisfaction, too. This means we are satisfying both the dealer and the customer.

Q. The Etios was launched in 2010. How has been your experience of the mass market with Etios and Liva?

A. In the eight months I have been here, our volume result is not as we expected. We adjusted the sales target looking at the reality, and to not lose money. We again looked at the market by city and by customer. We found a big potential in customers who are not necessarily attracted to fancy cars, but to quality and service. This strategy is working well. I see good signs. But I have to admit, even though we are doing very well, that is based on the revised volume target.

Q. What was the original target?

A. When we first launched the Etios, we put up a 70,000 plant capacity, raised it to 120,000, then to 210,000.

Q. So you expected sales to rise accordingly?

A. Yes.

Q. What is the revised expectation?

A. Since this May, the sales target is hitting the plan, hovering between 11,000 and 12,000.

Q. If customers are happy with the Etios, why are more people not buying it?

A. We have to share the experience of happy customers. That is what we are doing, city by city.

Q. Toyota is known for its processes. Books have been written about them. When you came to India and examined the Indian operations, what did you find?

A. Even though we had a difficult time in our factory, performance-wise and capability-wise they are so good. The mindset is the only problem. I found two issues. We needed to improve a little bit as a company. The car business has a lot of functions: manufacturing, sales and marketing, customer care, human resources. How to make them one team was my big concern. Sometimes you see communication problems - a silo mentality.

Q. You came into India one year after Hyundai, two years after Honda. You are far behind both. You must be restless. It has been 15 years.

A. Shekar Viswanathan steps in: At one stage we were far ahead of Honda. There will always be these cycles and we have to accept them. Of course, we want to get ahead. But what we are aiming for is something else. It is not just the numbers or market share that will make us happy. Ultimately, we want to be judged qualitatively: whether the customer is happy, whether we get repeat customers for our products. These nuanced parameters are more important to us, rather than competing with Maruti, which already has 45 per cent share. That is not our aim.

Q. That would have sounded so much better if you had 20 per cent market share, not 5.2.

A. Naomi Ishii: I am happy to hear such high expectation. It really motivates me. If I were you, I would say the same thing. As Toyota, once we enter a market, we have to establish a certain level of presence. Compared to the expectation of stakeholders in India, I have to admit we are not doing very well. This is a fact. I really want to expand the business in India. But we need time. As you know, the car business has a long lead time. From planning a vehicle to developing the vehicle and preparing for manufacturing takes four to five years. In that period somehow we have to survive. What I have decided is to enhance operation: sales power, customer service, manufacturing, HR - everything, so we can be competitive. My objective is to make this company profitable even though we don't have a new model.

Q. Why was everyone waiting for Naomi Ishii to come and start a new model programme?

A. Viswanathan: We were entering one of the most competitive segments [with the Etios]. We built a new facility. We were confident of doing well. In the meantime India tanked. We still decided to expand [capacity]. We said India was a growing market, we could do this. But then you know what happened to India. The GDP growth fell. The car market started going down. There was a policy paralysis and a rating downgrade threat. The MD or board cannot go against this situation and get new products. Some other companies did, but they were at a different stage in their investment cycle. Now things are changing. We have plans. We will manage month-to-month and then ramp up.

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