Scrapping policy and production-linked incentive will bring long-term benefits

Interview/ Vikram Kirloskar, vice chairman, Toyota Kirloskar Motor


Vikram Kirloskar, a fourth-generation entrepreneur from the business group that bears his family name, seldom holds back when he speaks about the problems of the auto industry. In an exclusive interview, he talks about the overall demand, the challenges before the sector, the four-month strike at the Toyota Kirloskar Motor plant at Bidadi near Bengaluru, and the road ahead for the company.

Q/How did you deal with the labour strike?

A/A month into the strike, in December 2020, we resumed production involving supervisory staff and other workmen to meet the pent-up market demand. Soon after, many employees gradually and voluntarily started returning to work, thereby ensuring minimum impact that the strike had on production or our customers and other stakeholders. In the first place, the pandemic has enabled us to further strengthen our processes and has helped us become more flexible along with business continuity plans. Our processes at the production end were agile to the extent where we were able to get past the challenges and meet customer demands. Our sales upswing over the last three months stands as a testimony to our strong fundamental practice of skilling our workforce across levels and our robust processes in preparing for all kinds of uncertainties.

Q/How has been the sales in the last two quarters?

A/Demand has been witnessing steady growth over the last two quarters. With factors like pent-up demand and the festive season contributing to the steady increase in the last quarter. Fortunately, the demand continued to surge even in this quarter, predominantly due to the growth in preference for personal mobility and the resurgence of smaller markets, which we were able to capitalise on. Two new launches and an array of attractive offers and finance schemes have also helped us maintain the momentum.

The new year, too, started on a positive note as we were able to sustain the demand generated in the previous quarter and our sales growth is a testimony to the same. In January, our wholesales have been very encouraging and the booking orders have also witnessed a significant rise. February 2021, which was the best month in terms of wholesales numbers in the last two quarters, has also been good in terms of market demand as well as customer orders, as we witnessed a growth of 36 per cent in domestic sales.

Q/What had been your strategy during the low demand period?

A/We follow the Toyota Production System based on the lean manufacturing concept that helps us optimise resources in terms of workforce and raw material inventories, thereby reducing overheads and cost. In essence, we became agile and efficient while reducing the working capital and financial burden of the entire value chain. We made every effort to improve our products, offer better services, enhance customer delight and digitise our sales operations for customer convenience.

Q/Many companies tried a hybrid sales model during the pandemic.

A/Digital platforms are playing a significant role in the new retail sales model, especially after the Covid-19 crisis. The Indian customers' views and behaviour towards an online car purchase platform have evolved and will further advance in the coming days. We have been constantly adapting to the changing market needs through our services. We have made provisions to digitise the sales process wherein the customer can take a virtual tour of the vehicle, select financing options and even receive a quotation online. We have also made provisions for delivering the vehicle to the customer’s doorstep.

Q/How has been the overall performance of the industry? Where is it headed?

A/There has been a V-shaped recovery in vehicle sales and we strongly believe that a healthy improvement in economic growth, as well as positive consumer sentiment due to an upward trend in personal incomes, will charter a strong growth path in 2021. The auto industry has also seen a clear shift towards personal mobility and the demand continues to remain robust. There is a rise in demand for compact cars and utility vehicles, but this trend could grow into other segments as well depending on factors like travel needs and the ability to spend.

A healthy industry also requires conducive government policies at both the macro as well as microeconomic levels that can promote demand as well as better production levels and we have seen some very welcoming and timely interventions by the government in this regard. We believe that the introduction of the scrapping policy and the production-linked incentive scheme will bring with it some long-term benefits.

Q/What are your views on localisation in manufacturing?

A/We are working towards reserving plant capacity considering our future product strategies including those under the Toyota-Suzuki alliance. On localisation, we are constantly trying to increase the levels with every new product launch and our dependence on imports has significantly reduced. As part of our commitment to supplier development, we impart over 48,000 man-hours of process and human resource training per year to our supplier partners that has resulted in an average localisation level of about 81 per cent. Currently, the localisation levels of our flagship products are averaging about 85 per cent. We will work closely with the government by supporting our tier I, II and III suppliers to reduce import dependence and become globally cost-competitive.