In the driver's seat: Toyota Kirloskar to make hybrid systems in India

Toyota sells the Vellfire, Prius, and Camry hybrids in India
Toyota Kirloskar Motor (TKM) plans to start manufacturing hybrid systems in India as it wants to cut costs and make hybrid models more affordable. TKM will also supply these systems to Maruti Suzuki India as part of the broader alliance between Suzuki Motor Corp (SMC) and Toyota Motor Corp (TMC). In March 2018, the two had inked an agreement to supply hybrid and other vehicles to each other in the Indian market.

“We are going to start making the entire hybrid system here. It was our plan well before Covid-19 struck,” Shekar Viswanathan, vice-chairman, TKM, told Business Standard, adding that the company has capabilities in Toyota Kirloskar Auto Parts (TKAP) and Toyota Industries. It is just a question of localising the system and stitching it into the product, he said.

Currently, Toyota sells the Vellfire, Prius and Camry hybrids in India. But their volumes have been small owing to the high prices, which come on back of punitive taxes levied on hybrid vehicles, said Viswanathan. (Vellfire and Prius are fully imported while Camry is locally assembled.) Local manufacturing will bring down the overall costs and lower break-even volumes.

Meanwhile, in the wake of the market situation post Covid-19, SMC and TMC are revisiting the timelines with regard to the supply of models to each other. “We made the announcements last year. The decisions are being worked out and timelines are being revisited,” Viswanathan said.

In May this year, Maruti Suzuki India said its board had approved the supply of a derivative of the compact SUV Vitara Brezza to TKM. On its part, TKM was to supply the Corolla to Maruti Suzuki. However, neither company has commenced the supplies yet, and Baleno remains the only model to get a co-badging. Toyota sells the Baleno under the brand name of Glanza.  

The manufacturing of hybrid systems is just one of several initiatives taken by the local arm of the Japanese car maker, which is expected to slip into the red for the first time in 12 years. In fact, TKM has taken multiple measures to reduce fixed costs and lower break-even to tide over the crisis brought about by the pandemic. Earlier this month, it launched a leave without pay (LWP) scheme for its employees, which allows them to take six months to a year off with a lien on employment. 

TKM is also taking a re-look at all its plans – from new model launches and capex to consolidating operations at its manufacturing units to conserve cash, said Viswanathan.

Quizzed on when the local production of hybrid systems would commence, Viswanathan said, “It’s a gradual process and we’ll share details as we move forward. It’s not a screwdriver technology and will have to be absorbed. So we cannot put a timeline to the launch.”

Puneet Gupta, associate director at analyst firm I.H.S Markit, said the hybrid technology will be Toyota-Suzuki’s answer to diesel. Starting from 2021 or 2022, the two companies are expected to launch a raft of hybrid models in a price range of Rs 7 lakh to Rs 25 lakh, he said. 

“The move will help them sweat their assets better and compensate for the void created by the exit of diesel,” said Gupta. Since April 1, 2020, Maruti has stopped selling diesel cars and Toyota, too, has pulled the plug on the diesel variants of Etios and Liva. 

Home-grown auto companies like Tata Motors and Mahindra & Mahindra, among others, have also announced plans to launch electric vehicles in line with the government’s Electric Mobility Mission Plan. However, Japanese carmakers like Suzuki, Toyota and Honda Cars India have been pushing for hybrids as an alternative technology to internal combustion engine-powered vehicles for the last few years. “We have always sworn by hybrids and believe it’s the ideal technology for a market like India,” said Viswanathan.

As for the alliance between TMC and SMC, the pandemic will only strengthen it, says Viswanathan. “During a downturn, alliance partners are in the best situation to help each other. When the whole market is expanding, there is scope for everybody. But that’s not the case in a contracting market — there will either be a scope for model A or model B,” he said.

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