Toyota Bets On Localisation To De-Risk Business From Supply Chain, Forex  Woes
The Toyota Motor Corp. badge (Photographer: Akio Kon/Bloomberg)

Toyota Bets On Localisation To De-Risk Business From Supply Chain, Forex Woes


Toyota Kirloskar Motor is looking at enhancing localisation of its products as well as technologies as it aims to de-risk its business from foreign exchange fluctuations as well supply chain challenges, according to a senior company official.

The company, a joint venture between Japanese automaker Toyota and Kirloskar Group, is increasing local content in car manufacturing as well as planning to produce hybrid systems in the country.

"We are looking at localisation not only because of Made in India initiative. Backward integration also insulates from exchange rate fluctuations and makes supply chain shorter," Naveen Soni, senior vice president (sales and service) at Toyota Kirloskar Motor, told PTI in an interview.

As part of the process, the company is constantly trying to increase local content in its products, he added.

"It is an ongoing process. The engine for Innova Crysta is now manufactured locally. Almost 85% of the components used in the engine are locally manufactured. We have gradually increased localisation in gear boxes and other critical components," Soni said.

The automaker also plans to locally manufacture hybrid systems in the country. Toyota Kirloskar Motor currently imports such systems.

As part of Toyota's global collaboration with Suzuki Motor Corp., the systems could also be supplied to Maruti Suzuki India. The company, however, did not elaborate on the exact plans.

"There's nothing we can share publicly at this moment, beyond what's been publicly announced to date. As a matter of policy we do not discuss future product and investment plans," Soni said.

"Having said that, we have always intended and aimed at creating competitive, reliable and scalable value-chainby building local capabilities be it for the traditional internal combustion engine, electrified powertrain or any other technology," he said.

Even Toyota's alliance with Suzuki focuses to strengthen the competitiveness of both the companies by applying their strong points and learning from each other, he said.

"However, a more comprehensive road map and conducive policy environment would help us to effectively plan the long-term product strategy," Soni said.

A hybrid vehicle has more than one source of power. Usually, it combines a conventional combustion engine with an electric motor to run the vehicle.

In March 2018, Toyota Motor Corp. and Suzuki Motor Corp. had concluded a basic agreement for supplying hybrid and other vehicles to each other in the Indian market.

Soni said that hybrid technology can accrue various benefits to the automaker.

"We believe that the form and shape in which we would like to electrify our vehicles, we find that hybrid is an optimum mix of values like power, fuel efficiency, customer convenience and regulations compliance," he said.

When asked if the company is focusing towards petrol, hybrid options in order to reduce dependence on diesel cars, Soni said: "We believe in future all technologies will have space depending on size and class of the vehicle".

Toyota firmly believes that "all technologies will co-exist in the future. It won't be like one technology will take over the another". Customers will decide what they want, Soni said.

According to him, even with an increase in diesel fuel prices as well as overall rise in prices of BS-VI diesel cars, demand for its models like Innova and Fortuner remained strong.

"Yes smaller diesel cars tend to become unpopular because high cost of acquisition. But for our models like Innova and Fortuner, the customers still prefer diesel powertrains. So, this segment remains unaffected even after parity in petrol and diesel fuel prices in some regions," he said.

Hybrid technology would also help in complying with stringent Corporate Average Fuel Efficiency regulations, Soni said.

"Regarding CAFE norms, all companies have defined their own way of meeting the norms... fuel efficiency has to be increased year-on- year... globally also hybrid technology has given automakers the advantage to conserve fuel and protect environment as well," he said.

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