Toyota Has One Small Car and Many Big Plans
Image: Mallikarjun Katakol for Forbes India
ot, grimy, full of noxious fumes and occasionally splattered with dog-piss, the road Yoshinori Noritake was staring at in Bangalore seemed forbidding. The chief engineer now for Toyota’s passenger vehicles division, he tugged uncomfortably at his custom made suit. The Peace Boulevard in Hiroshima seemed a distant dream from another time. But with the precision characteristic of Toyota, the company he works for, he positioned himself at that great icon of Indian democracy — the traffic signal.
Through the chaos, he could see monstrous trucks hold court with quaint auto-rickshaws; government buses enforce the iron hand of the state; faux SUVs air-kiss the real McCoys; taxis in the middle of a mutiny and small cars organising a mobocracy; handcarts, pushcarts and cyclists seemed desperate to secede, but nobody gave a damn really.
Strange place, Noritake thought. Why do Indian drivers change lanes so often? How do they plough through forces that accompany constant acceleration and deceleration? Why do people try and fit cars into every empty space on the road? Why is parking a car tougher in India than driving it? When a car is started after it has been parked on an incline for a night, what happens to its lifespan?
The more Noritake thought, the more he realised how right, how astute, Kazuo Okamoto had been in that meeting — about a small car — four years ago at Toyota City in Japan.
Summons from the Sensei
2005 was a lovely year. People all over the world were bracing for a bull run. India’s domestic consumption and China’s investment boom were being spoken of with awe and envy in corridors that mattered, including Okamoto’s office. The world knew of him as an automobile engineer par excellence. Inside Toyota, everyone knew him as the Keeper of the seal of Corolla — their best-selling model ever. In the forty-odd years it’s been around, Toyota has sold a Corolla every 40 seconds. This, incidentally, makes it the world’s best-selling car ever as well.
The emergence of BRIC countries, especially India was both exciting and disturbing to him. Disturbing because Toyota was a non-entity in these markets and exciting because it seemed as good a time as any to make a fresh play.
He knew Toyota had a problem in emerging markets. Almost every automobile manufacturer in the world had come to terms with the potential of this region. For some like Fiat, it was simply about survival. For others like Ford, it was fait accompli. “If you are not here in the right segments, you’re never going to be a winner,” says Michael Boneham, managing director at Ford India. It took the company 13 years to get its act together in the country with the launch of Figo recently. Ford now sells more than 6,000 units of the model every month.
Then there’s Volkswagen, Toyota’s closest rival. It is the market leader in China, the world’s largest automotive market and among the top five manufacturers by market share in Brazil and France. It was sniping at Toyota’s indomitable position.
Okamoto’s problem was Toyota didn’t have any compact cars in its portfolio at a price point it could sell to customers in emerging markets. That is why he summoned a young Noritake and asked him to assess the potential of a low cost car for emerging markets; something Toyota had never done before. What it did know, like most other manufacturers, was to build cars for the developed world. The developing world was dealt with by delivering watered down copies, which, with hindsight, was not exactly the smartest thing to do. As Carlos Ghosn, CEO of Renault Nissan once said, if you ask designers with Western sensibilities to build a small car, they’ll inevitably come up with something beautiful, but at thrice the price what an emerging market customer can pay.
It was a sentiment Okamoto had come around to believing as well. And he wanted his engineers to figure how to make a good quality, low cost car. “That was my homework from him,” says Noritake. Towards the end of that year, Noritake proposed a rough plan that outlined how things could be done. The plan found its way to Katsuaki Watanabe, then the president of Toyota Motor Company (TMC), who quite liked what he saw and promptly dispatched Noritake to Bangalore in early 2006 for the first time to start work on an entry size family car (EFC).
Now called the Etios, it is ready to roll from showrooms in India for emerging markets across the world on December 1. Toyota believes its engineers have built a ‘Corolla’ that will see the company through the rest of this century.
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