Toyota emphasises on localisation to combat exchange rate pressure

Toyota Kirloskar Motor, the Indian subsidiary of the world’s leading automaker is streamlining strategies to combat the constraining effects of the value depreciation of rupee in terms of dollar. Since the company majorly imports parts and components from Japan for its top selling models in the Indian market, Etios siblings, Fortuner and Innova, the car maker is facing immense cost pressure.

Toyota emphasises on localisation to combat exchange rate pressure

 

At present, the localisation level in the production of these Toyota models stands at 70 percent, which will be ramped up to 90 percent by March 2013 in a bid to offset the exchange value pressure.

Mr. Hiroshi Nakagawa, Managing Director, TKM announced that efforts are being directed to attain a tough goal of 100 percent component localisation and thereby, it is infusing Rs. 600 crore in its ancillary company, Toyota Kirloskar Auto Parts in Bidadi to commence the production transmission and engines for small cars.

With a huge leap from third rank to the pinnacle position globally, Toyota is aiming to accelerate its growth pace in India by localising its production processes in a bid to pass on the cost benefit to the buyers. This strategy has worked wonders for another Japanese automaker, Honda and is deemed as a long term growth strategy.

While production ramp up and expansion of localisation activities are on the check list, the company aims to implement plans to withstand the new challenges that came in the form of Mahindra & Mahindra’s new Xylo and hot selling SUV, XUV 500, Maruti Ertiga compact MPV and BMW X1. The sales boosting mid-size sedan segment has hardly witnessed any development from Toyota. This segment is currently facing intensifying rivalry among Maruti SX4, Hyundai Verna, Skoda Rapid, Tata Manza and Nissan Sunny.