In an exclusive interview to The Sunday Guardian, Vikram S. Kirloskar, Vice Chairman, Toyota Kirloskar Motor Private Limited, outlined his vision and dreams for the company. More importantly, he spoke about how important it is to have a lower GST rate to spur growth in the auto sector to create more jobs. Commenting on the pollution and smog in North India, Kirloskar said that the automobile industry was the “soft target” of environmental groups and the “real culprits” were other issues. Excerpts:
Q. The Kirloskars have been a pioneer as far as remaining invested in Karnataka for several decades now. How has been your experience?
A. The Kirloskars came into Bengaluru in 1945 when Kirloskar Electric was started here. My experience and what we have seen here in the past 20 yearshave been very good. We have seen several changes in government; political parties change. The main thing that I tell people is that no matter which government is incumbent, there has been no shift in policy with change of government. This is visible and is a very good thing for the industry that there has been a continuity which has helped the industry grow.
Q. Karnataka has a history of being an engineering hub; how has it helped?
A. There is wealth of talent available here in Karnataka and that is an advantage. The machine tool industry, like HMT, which was set up here, has been a great support to the industry’s huge technical base that one can see especially in Bengaluru, and has been given a boost to Karnataka. The presence of companies like HAL and HMT for a long time has helped set up a manufacturing base with high precision suppliers. The CII has set up a quality institute which is a good support to the industry.
Q. Toyota Kirloskar Motor has moved from relying on high contentimports to manufacturing mostly in India. How has been TKM’s experience in vendor development in the last 20 years?
A. The automobile industry relies entirely on vendor development and we focus especially on Tier 1 and Tier-2 vendors who supply large assemblies; we don’t tend to buy from suppliers. The vendors who work with us are able to make high precision components and assemblies that we need for our Toyota vehicles. We help our Tier 1 and Tier 2 partner industries to, in turn, develop their suppliers as it is a linkage which ultimately works for our common goal.
Q. How challenging has it been to develop an eco-sphere of vendors and generate local capabilities in manufacturing components and providing local employment?
A. Our basic premise is to develop a common goal and common standards. From data I can share, if you look at quality levels in defects of parts per million, we were at the lowest 20 years ago, but now, we are in the top in Toyota factories worldwide. We believe in working together with vendors. We work in partnerships and tend to have single sourcing.
Q. What is it that you still look forward to from the Karnataka government?
A. The standard wishlist that everyone in the industry has is to give us good road infrastructure; that is the key thing. If we travel on highways, they are world class; but issues in the city are related to political issues and those related to land use; such issues need to be sorted out. I must add that the power situation inKarnataka has been very progressive and it has been pretty good. We are able to buy power and it’s a lot easier than in many other parts of the country.
Q. The country is emerging out of the shadows of demonetisation and the teething issues related to GST. How have these impacted Toyota Kirloskar Motor and the automobile industry?
A. On demonetisation, I have no comment; but on GST, for people like us in the auto sector, we had MODVAT (Modified Value Added Tax) in place and we paid central excise duty. GST works very well for us. People who have not paid taxes in the past, it’s a learning experience for them. The faster the country learns to pay taxes, the more it will benefit the country and help in its growth in the long run. My hope is that as more people come in the tax net, the revenues will go up and the tax rates will come down. Overall, I feel that the auto industry is a highly taxed industry. It is the biggest employment generator in the country. I believe in free market and it’s good not to interfere in the free market. Let the market grow. Let us have taxes at a reasonable level and keep a stringent watch on policies and the environment.
Q. The biggest challenge in the country is employment generation. How do you see this issue being addressed in the manufacturing sector? Do you foresee growth in jobs?
A. Our biggest concern in the coming years is employment generation. When you talk of industrial revolutions, even in history, it led to job cuts. The present Industrial Revolution or IR4, as it is being called, also has similar issues of job cuts.IR4 it is basically the internet of things, it will affect both the manufacturing and service industries. There is evidence of job cuts. As there are job cuts, there will be concern on the employment front, as industry gets into things like Artificial Intelligence.This is a really big concern.Until there are growth triggers, retaining or expanding jobs will be a big difficulty.
Q. We are seeing the Government of India putting more thrust on the “Make in India” initiative. The Karnataka government is pushing for more manufacturing in the state.
A. We fully support the “Make in India” and “Make in Karnataka”initiatives. Innova is now made in India and that is our biggest production—we not only make parts here, we use equipment and raw material as well. When we started Innova, it was not like this.However, now we can say that the Innova and, to a large extent, the Fortuner are more or less fully made in India. We have been able to develop and add capacities to ensure not just import substitution, but also been able to export components and sub-assemblies. We are also exporting a few thousand ready vehicles.
Q. The smog issues in North India have once again raised concerns about diesel vehicles. How do you see the impactof such moves as banning diesel vehicles?
A. The banning of 2 litre diesel vehicles did not help; the auto industry is the easiest target on pollution issues. Automobiles contribute just a small percentage to pollution, but the real culprit is the burning of crop stubble. Other industries like construction and mining also contribute to pollution. The auto industry in general, and we at Toyota Kirloskar Motor in particular, are ready with Bharat Stage VI (BS VI). However, fuel available in the market is only Bharat Stage IV (BS IV). When refineries like Reliance can process Euro VI fuels for export, it’s time the other refineries also move in that direction for BS VI quality fuel for the Indian market.
Once the fuel standards improve to BS VI, issues of emission of NOx (Nitrogen Oxide), Sulphur and CO2 (Carbon Dioxide) will be resolved. The onus is on the fuel companies to give world class fuel.
Q. Toyota Kirloskar Motor is a showcase of industrial prowess and unique environment friendly design. Can you please elaborate on the same?
A. For us as a company, we have a focus on reducing our carbon footprint and have internal targets to reduce our carbon footprint. We care for the environment and we recycle things including water. We don’t use fresh water and rely mainly on recycling and rain water harvesting. On the energy front, we have a large percentage of plants running on solar power. On the vehicle side, we are Bharat VI ready, even as of now, and as soon as the fuel comes, we will be ready with our BS VI vehicles. Our factory has led in showcasing environment friendliness as far as electricity and water are concerned. From here, we teach the other Toyota factories in the world on sustainability issues. What we do on the environment front is very fascinating.
Q. You have chosen to be in a niche segment as an automobile manufacturer. What can we expect in the coming months? Do we see a transition of Toyota Kirloskar Motor to the small car segment?
A. In terms of value, Innova is the largest Rupee brand in India. We have our own vision of what a car should be and focus on features like safety we wish to provide our customers.
We have our own vision of what car we should offer our customers; perhaps, the volume will come as the market expands. As far as new models are concerned, we generally don’t share information in advance (laughs), but there is something coming sooner than later.
Q. Do you have any final message for Invest Karnataka?
A. We have to develop industries in Karnataka at a much higher scale to meet the expectations of the people, but at the same time, we have to take care of the environment.