In this week's edition of The Forbes India Show on CNBC-TV18, Hiroshi Nakagawa, MD and CEO, Toyota India says that the company will grow in India step-by-step and hopes the Budget will reduce interest rates, taxes and cheer consumer sentiment.
The Budget will be good if it boost the customers’ buying sentiment, supports with taxation and announces measures that will enhance the auto industry
Hiroshi Nakagawa, MD and CEO, Toyota India says the Asian auto giant will grow in India step-by-step and hopes the Budget will reduce interest rates, taxes and cheer consumer sentiment.
Toyota India has seen a number of firsts. The most recent is the design and development of the Etios and Liva for India by Indian designers and the rolling out a car-model for under Rs 5 lakh.
Below is an edited transcript of the show on CNBC-TV18
Q: The Etios and Liva are cars designed very much for India. How happy are you with the sales that they have recorded?
A: These models are one of our first that have been designed for India. These models are part of Toyota global range focusing especially on emerging markets. For the first time, we have begun to focus on the Indian consumer and the Indian market. Every aspect of India has been studied for the development of the Etios. Simultaneously we would expand this Etios model to other emerging markets. In terms of Indian market sales, I am very happy as the customers have acknowledged the challenges that we overcame.
Q: When you launched it a year and half ago I think your company said you were looking at 100,000 cars in 2012. Was that target achieved?
A: Yes. Two years ago we launched the Etios. Firstly, we launched a sedan model following a hatchback model and then followed it up with a diesel variant. In total, we achieved the original target of 100,000 cars.
Q: Could you have brought a small car into India a little earlier? You were a pioneer in the Indian market and introduced lots of segments. With the Qualis and the Innova you have really cracked open a new segment. Did you ignore the small car market for too long because that is a fast growing market?
A: Yes. The pioneers in the Indian auto industry are Maruti Suzuki , Tata Motors and Mahindra and Mahindra . We are challengers. We are still small compared to these giants. The Toyota philosophy is to grow step by step.
Q: You saw a gap in the Indian market and you introduced Qualis and Innova and then you decided to move into the small car market. Is that correct?
A: Yes. We have a kind of responsibility towards not only to customers, but also to employees, suppliers and dealers. Once we commit, we have to slowly rise and grow step by step.
Q: What do you feel about the industry today? The year 2012 was difficult. The data for the automobile industry in January revealed a highly negative picture. Toyota saw a 23 percent drop in January. When will things get better?
A: According to my understanding, India is a very promising market offering stable growth in the mid-and long-term. It is difficult to judge from last year or beginning of this year. Though the market is shaky, there is growth. However, interest rates are still high, there are difficulties related to exchange rates and a slowdown in customers’ perception to buy cars.
Q: Do you expect anything from this Budget? What would you want and what do you expect?
A: I have observed that a lot of people visit our outlets but they do not, waiting for the right moment.
Q: How can the government help you turn that interest into a purchase?
A: The government can help by contributing to the increase in the consumer’s buying power. So I look forward to some interest rate adjustment in the Union Budget.
Q: When will you say it is a good Budget?
A: The Budget will be good if it boost the customers’ buying sentiment, supports with taxation and announces measures that will enhance the auto industry.
Q: Has the downturn in the last two years affected any of your investment plans? You have two factories at the moment. There were reports that you are planning a third factory. Are you planning a third factory, do you have any investment plans in the next year or two years and are these factories running to full capacity?
A: Yes, we built an additional plant after the first reached full capacity. Now the second plant has almost reached full capacity as per plan. Together both plants rollout 310,000 units.
Q: So that is about 100,000 in the first plant and about 200,000 in the second plant?
A: Yes. We have no plan to increase investment or initiate capacity expansion.
Q: Are you planning a third plant? When will the third plant be set up, if you say that your two plants are near full capacity?
A: There are rumours, but we have no plan for a third plant.
Q: Are you going to launch any improvements in the Etios and Liva? A few customers opine that though they are good models, they do not look as luxurious inside. So, are you planning a revamp of these two models?
A: Toyota’s culture calls for continuous improvement or Kaizen. So, every moment and chance we get, we try to improve our models.
Maruti Suzuki stock price
On July 31, 2014, Maruti Suzuki India closed at Rs 2524.50, down Rs 27.4, or 1.07 percent. The 52-week high of the share was Rs 2663.00 and the 52-week low was Rs 1217.00.
The company's trailing 12-month (TTM) EPS was at Rs 92.13 per share as per the quarter ended March 2014. The stock's price-to-earnings (P/E) ratio was 27.4. The latest book value of the company is Rs 707.16 per share. At current value, the price-to-book value of the company is 3.57.
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