Toyota may source small car engines from Japan

Toyota Kirloskar Motors (TKM) is likely to source engines from Japan for its small car to be launched in India by December 2010.

“Selecting a geography would depend essentially on availability of capacity and suppliers in that country. As of now, we plan to source from Japan, Thailand and Indonesia,” said Shekar Viswanathan, deputy managing director (commercial) of TKM. He added that the engines could be sourced from Japan.

The sourcing plan emerged in the wake of fluctuation of the rupee against other currencies, in recent months.

Toyota Motor Corporation, the parent company of TKM, had to go in for major production cuts in Japan, owing to a sudden drop in demand since last year. It had five idle days in production in March and planned to have three in April. The company could also go in for a production cut from a planned 12,000 vehicles a day to 10,500 vehicles a day in May. “There have been major production cuts in Japan in the last few months and spare capacity is available,” said Viswanathan.

The company could make the engines in India once production volumes touch around 2.5 lakh cars a year. “As of now, we plan to start production in December 2010 with 70,000 cars per annum and the capacity can be scaled up with demand. Not much investment would be required to ramp up capacity,” Viswanathan said. He denied plans for any capacity cut in the upcoming small car plant at Bidadi near Bangalore.

TKM is building a second plant near its existing factory in Bidadi for the small car, with an investment of Rs 3,200 crore. When asked if the company was reviewing investments in the plant being built, Viswanathan said they were trying to contain cost within the projected amount. “The project cost has indeed escalated”, he admitted.

The new plant has a planned capacity of 1 lakh cars a year. TKM had earlier indicated to Business Standard that if there was enough demand for the small car, it could think of doubling the capacity in three to four years.