The art of war...and losses!

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Toyota continues being hit despite expanding operations; the whys...

Let’s be honest! The double digit growth rate witnessed by the domestic auto market simply rocks. Between April-March 2007-08, 1,203,531 cars were sold in India and manufacturers are finding it hard to meet the unfathomable demands. As a consequence, competitors like Hyundai, Honda, and our protagonist Toyota Kirloskar too are all set to expand capacities in India.

According to market reports, Toyota will invest close to $340-360 million for a new plant near Bangalore, which is expected to have an annual capacity of 100,000 units, taking the total capacity of Toyota to nearly 150,000-160,000 units. Srinivas Krishnan of BS Motoring spoke to B&E, “Toyota wants to increase capacity simply because it wants to sell more cars here.” Ironically, Toyota continues suffering hits to their net earnings despite being operationally efficient.

Where is Toyota going wrong? With a vibrant automotive market, India offers a major opportunity towards future sustainability, but only through massive volumes; an area which Toyota has still not mastered. Toyota – which is already facing strong competition from rival Honda in the D segment, where the former’s Corolla has been a casualty at the hands of the latter’s Civic – is thankfully chalking out plans to launch a new small car in India, based on Toyota’s iQ concept. “Toyota is developing an all new small car for the Indian market,” says Krishnan. But the fact is that Honda, with its planned launch of the smashing small car Jazz, seems to have taken the lead here too. The answer to Toyota is quite simple – mass appeal cars! Or of course, learn Sun Tzu’s The Art of War...& Losses!

Karan Mehrishi

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Source : IIPM Editorial, 2008

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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