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Automobile Industry in India

Toyota Kirloskar Pvt. Ltd

Toyota is a global leader in automobile industry producing over 50 variants of cars in


India. The company follows hybrid strategy by clubbing chase and production levelling
strategy because overproduction is considered as the mother of all waste. Production
management is responsible for finding the best combination of strategies that minimizes the
sum of all costs involved, providing the required service level, and meeting the objectives of
the financial and marketing plans. In Toyota, production levelling is followed. If demand
increases, production is managed by the following two ways:

1. Scheduling 2 shifts a day. i.e., 2 x 8 = 16 Hours.

2. Reducing takt time, thereby producing more number of cars.

Assemble to order: In products like automobiles where multiple product options exist, and the
customer is not willing to wait until the product is made, manufacturers produce or buy and
stock standard component parts (Ambe, Intaher ,2011).When manufacturers receive an order
from a customer or dealer, they assemble the component parts from inventory according to the
order. Since the components are stocked, the firm needs only time to assemble before
delivering to the customer.

Source: TKM production dept. and team-bhp.com.


Toyota has an inventory capacity of approximately 10,000 units. The maximum number
of cars produced per day was 265 and monthly around 5300 cars. A sudden spike in car sales
was noted in the month of July 2017. Implementation of GST is identified as the main reason
behind this since a single tax system was implemented across the country replacing existing
multiple state taxes. The company recorded a huge 43% increase in its sales in that month and
sold 18000 cars. The implementation of GST increased the demand for cars and Toyota was
able to handle that demand very precisely because they had inventory buffer. This spike in
sales was managed by reducing their takt time from 3.68 to 2.63 minutes and clearing their
inventory levels.

Toyota Kirloskar Motor sold a total of 12335 units in the domestic market in September
2017. The company exported 1343 units of the Etios series this month thus clocking a total of
13,678 units registering 2% growth as compared to same period last year. The festive season
has given the purchasing impression of the customer a favourable boost. Customer orders
remained solid despite the product cost hike in line with this month's cess hike. New Fortuner
saw overwhelming demand from customers even after the effect of price increase and a year
after its launch. (Toyota Bharath,2017)

Source: From TKM production dept. and team-bhp.com.

A similar strategy was followed in 2018 as well. The gross domestic sales of TKM was
13113 units on May 2018. And 827 units were exported this month thus clocking a total of
13940 units. In May 2017, the domestic sales were 10914 units and 1425 units of the Etios
series was exported. (Rushlane, May 2017)

Along with the segment leading products Fortuner and Innova Crysta, introduction of
Yaris played a significant role in contributing to the overall positive sales growth as compared
to the same period last year. In July 2018, Toyota Kirloskar Motor (TKM) reportedly witnessed
a 23 per cent drop in sales with 13,677 units as compared to 17,750 units in July 2017. In terms
of exports, Toyota has shipped 747 units of the Etios series this July, thereby taking the total
sales number to 14,424 units. In the same month last year, the company had exported 1,723
units of the Etios series, thereby witnessing a decline of 56.64 per cent in July 2018. The Innova
Crysta has reportedly been the highest contributor in June-July 2018 with 21 per cent growth
as compared to the same period in 2017. However, considering the pre and post GST months
of June-July 2017 and its effects, the company has now reported a bimonthly sales growth of
36 per cent in June – July 2018. (Puthran, N. (2018, August 02))

Toyota Kirloskar Motor reported an increase of 11.47 % in total sales in August at


14,581 units compared to 13,081 units in the month of August. In August 2018, the firm sold
14,100 units in the domestic market. In the same period last year, it had sold 12,017 units on
the domestic market. Innova Crysta and Fortuner were performing consistently as segment
leaders, which drove TKM's domestic growth. The good response to the dual tone Liva limited
edition has also contributed to the positive growth in domestic sales this month. The strong
reaction to the Liva limited edition dual tone also led to this month's favourable development
in domestic sales. Floods in Kerala has had an impact in the sales as it is very important market
for them. (Pti. (2018, August 31))Toyota Kirloskar Motor (TKM) sold 11,390 units in
November, as against 13,420 units in the same month in 2017, registering a 15 per cent decline
annually. Of the 11,390 units sold in November, 10,721 were in the domestic market and 660
units of Etios series were exported. Fluctuating exchange rates, rising fuel costs, and high-
interest rates have impacted the consumer sentiment in the auto industry. Demand has
witnessed a downward trend over the festive period as compared to same period last year. The
Company maintained a lean inventory at dealerships to avoid stock pileup as the festive season
did not spur customer demand. Toyota Kirloskar Motor reported a 10 per cent increase in
vehicle sales in December 2018 to 11,830 units, compared with 10,793 units in the same month
last year. For the calendar year 2018, the company said its annual domestic sales rose by 9 per
cent to 1,51,474 units, against 1,39,566 units last year. In December, the company also exported
812 units of the Etios series, compared with 812 units in the year-ago month. The buying
sentiment had seen a slowdown in the past few months owing to adverse effects of
macroeconomic factors, yet the industry hit back with a steady growth in sales (Economic
Times,2018)

Source: From TKM production dept. and team-bhp.com.

2019 was not a good year for automobile industry. There were dips in sales during
January to March 2019 compared to last year. This was because of Supreme Court’s order
mandating BS-VI from April 2020 and banning all the car manufacturers from selling cars with
older BS-standards since then. The global economic slowdown and lack of credit for vehicles
are weakening the demand. Hence the companies have to clear their old stocks. So they are
providing offers and discounts to push the sales.

Toyota also got a push in its sales, thanks to its newly launched Glanza. Because of
overstock Toyota had to reduce the number of cars manufactured per day. This was done by
operating the plant for single shift and reducing the takt time to 2.63 minutes, thereby producing
175 cars per day. Toyota Kirloskar Motor (TKM) reported a decline of 17.72 % in total sales
in April to 11,413 units. The company sold a total of 13,871 units last year. Last month's
domestic sales were 10,112 units compared to 13,037 units in April 2018, a 22.43 % decrease.
Due to the uncertainty of general elections looming over the economy, the sector encountered
a slowdown and this slow pace persisted till the new government was established. Consumer
feelings have been dampened by a number of variables, such as tight liquidity, heavy insurance
and high expenses (Economic Times,2019).

Source – www.teambhp.com, Apr 2019

References
[1] Ambe, Intaher & Badenhorst-Weiss, Johanna. (2011). An automotive supply chain model for

a demand-driven environment. Journal of Transport and Supply Chain Management. 5.

10.4102/jtscm.v5i1.18.

[2] Retrieved from https://www.toyotabharat.com/news/2017/toyota-kirloskar-motor-sells-

14000-units-in-october.html

[3] Bharat Stage VI norms: Know how they will impact you. (2018, October 25). Retrieved from

https://economictimes.indiatimes.com/industry/auto/cars-uvs/bharat-stage-vi-norms-know-

how-they-will-impact-you/articleshow/66362907.cms

[4] Home | Team-BHP - The Definitive Indian Car Website. (n.d.). Retrieved from

http://www.team-bhp.com/
[5] Ians. (2018, December 01). Toyota Kirloskar Motor posts 15% dip in November sales on

rising fuel costs. Retrieved from https://www.business-

standard.com/article/companies/toyota-kirloskar-motor-posts-15-dip-in-november-sales-on-

rising-fuel-costs-118120100535_1.html

[6] Pti. (2018, August 31). Toyota Kirloskar sales up 11.47% in August - Times of India.

Retrieved from https://timesofindia.indiatimes.com/auto/miscellaneous/toyota-kirloskar-

sales-up-11-47-in-august/articleshow/65626468.cms

[7] Puthran, N. (2018, August 02). Toyota Kirloskar Motor witnesses 23 per cent drop in sales in

July | CarTrade. Retrieved from https://www.cartrade.com/news/toyota-kirloskar-motor-

witnesses-23-per-cent-drop-in-sales-in-july-136263.html

[8] Sukesh. (2017, August 01). Toyota India Achieves Best Ever Monthly Sales In July 2017.

Retrieved from https://www.drivespark.com/four-wheelers/2017/toyota-india-monthly-sales-

july-023196.html

[9] Toyota Glanza. (n.d.). Retrieved from http://www.toyotabharat.com/

[10] Toyota May 2019 sales decline - Over 2,600 Glanza dispatched to dealers. (2019, June 01).

Retrieved from https://www.rushlane.com/toyota-may-2019-sales-decline-12312219.html

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