‘The founding principle of Toyota is to set the price first’: Masakazu Yoshimura
Toyota has brought its self-charging, strong hybrid technology to the mass segment in India with the introduction of the Toyota Urban Cruiser Hyryder and the Innova Hycross. Toyota hopes these mass market models will fuel the adoption of strong hybrids in the market. However, unlike EVs, there are no tax breaks for hybrids yet which makes pricing them aggressively a challenge
To democratise hybrids they need to be priced competitively, how are you balancing the price versus demand for hybrid tech which is costly and has no tax advantage?
Firstly, hybridisation is one route to electrification that we have been following. Toyota’s first hybrid (the Prius) was launched in 1997 and this hybrid powertrain is common for EVs as well. Hybrids being a mix of battery and engine, have more partsand each part adds to the cost. So, hybrids are costly but we are always looking at what the market price is and also the introductory price of this technology which is making a start in the Indian market. Hence, the first job is to commonise (with other Toyota and Maruti-Suzuki models) and popularise the new tech with an affordable price and then improve the cost through ‘Kaizen’ (continuous improvement) activity. So, in this first stage we set the price first and hence we may not be that profitable, but as the volume grows, we recover cost.
Is this a departure from the earlier ‘cost-plus’or profit[1]led approach?
The founding principles of Toyota is to set the price first and then reduce the cost, that is the philosophy we all have been following.
So, is localisation a key factor in reducing costs?
Yes, localisation is a key to reducing cost and we will look at further localisation because this is a cost reduction tool. We are always looking to source locally and will explore any local ecosystem and potential partner to help reduce the cost of production. TKM is the first manufacturer of Toyota’s e-drive transmission outside Japan. The first batch is being exported to Japan. We are very proud that the global hybrid e-drive transmission is now produced in India at our Bidadi plant thanks to our ability to deliver technology at good quality and cost. We are looking at many such avenues for further localisation.
Given the encouraging demand for the strong hybrid variants, are you tempted to raise prices?
The demand has exceeded our expectations and in fact has been too much and this is fascinating to me and all of us in the company. I am feeling very sorry, we can’t produce enough to meet the demand for the first huge orderbook, but we need to wait for more time to get a better idea of the response from the market and the Indian customer. We are not planning to increase prices significantly and any price hike will be largely due inflationary reasons, or any spikes caused by geopolitical issues. We will carefully watch the market movement.
What is the possibility of hybrids in smaller vehicles where Suzuki could play a bigger role?
The global partnership between Suzuki and Toyota is progressing very well. Engineers from both companies are investigating interesting solutions and innovations. Suzuki is looking at a smaller car and we are looking at a larger size of vehicle. As you know, in developing any new product the first challenge is always cost and the size. We are reducing the cost and we are making very good progress. We are always looking at many options wherever our customers are and we also look at collaborations to serve them. I can’t disclose precisely at the moment, but there will be some interesting solutions.
Where does the diesel fit?
Toyota as a brand is trying to offer customers a choice of powertrains. At the moment, after the latest BS 6.2 emission standards, there is still an option of diesel being made available as it is more fuel efficient then petrol and there is a demand. There was a rumour that we were exiting diesel but it’s not true, we are back with diesel.
This interview was first published in Autocar Professional’s February 1, 2023 issue.