The Hindu Business Line : Toyota may need Rs 1,750 cr for small car project

Sources in Toyota Kirloskar told Business Line that the small car project will need at least Rs 1,750 crore to kick off the project. Toyota Kirloskar during the last seven years, and two multi-utility vehicles later has invested only around Rs 1,200 crore.

The company had last year sent a proposal to the Karnataka Government for setting up a second plant worth around Rs 1,200 crore. But because of increased costs, the Toyota management is now planning to revise these investment figures. Sources said as Toyota is planning to launch the car towards the end of 2008, the work on the project will have to start later this year.

They said that the small car project will entail setting up zonal offices across the country, beefing up its dealer network and opening up a few centres for supply of spare parts.

"The entire operations have to change as we will have to play a volumes' game," sources said.

The carmaker has already made a beginning to this effect and has set up a regional spare parts depot in Delhi.

This has been done to ensure smooth and timely delivery of parts to the dealerships in the northern region. The number of dealerships has also increased to 55 from 40 in 2005.

The reason for bigger investment is because of the increase in capacity. At present, the capacity is around 60,000 units per year. Toyota has said that it will have a market share of around 10 per cent by 2010. In volume terms, it will be around two lakh car units.

The extra investment will go towards setting up additional capacity of around 1.5 lakh.

But what will help the project will be the clean balance sheet of the company. Toyota Kirloskar has from this year onwards, started making profits.

It posted a profit of around Rs 90 crore during 2005-06, out of which nearly Rs 75 crore went towards wiping out the previous losses.

For the entire fiscal year, the company had a turnover of around Rs 4,000 crore, an increase of around 26 per cent over the previous year.