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Toyota Kirloskar Motor is gradually bringing down its dependence on imported steel following its tie-ups with Tata Steel and JSW even as the government is nudging the automakers to source them from domestic manufacturers.
“We have an ongoing programme with Tata Steel and JSW to gradually localise all the steel we import now,” Toyota Kirloskar Vice-Chairman Shekar Viswanathan told BusinessLine.
The government has been pushing car manufacturers to source raw material such as steel from local producers. Last year, the Steel Ministry had announced strict import norms for high-grade steel products sourced by local car-makers from Japan and South Korea. It is likely that the government may allow certain high grade steel for the auto manufacturers to be imported for some more period of time though it is learnt to be keen on setting a deadline for stopping the import for all of them.
At the same time, there has been an increase in the import of steel from China, South Korea and Japan who are learnt to be resorting to dumping low-grade products into the Indian market taking away huge share from domestic manufacturers. The domestic steelmakers want the government to impose higher duties on imported steel to protect their interests. According to data available with the steel manufacturers, imports have grown eight per cent during April-December (2018) while exports have fallen 17 per cent during the same time.
Viswanathan said sourcing steel from local manufacturers will help them drive down costs that could eventually be passed on to customers. “Our interest is to localise because we have to keep a watch on the cost curve.” He, however, made it clear that Toyota has been carrying out this exercise independent of any pressure from the government.
Quality of steel
Viswanathan also pointed out that the quality of domestic steel is of superior as the local manufacturers have been investing hugely in technology and capacity to upgrade their products. “The quality of steel is excellent here because of the kind of investment the steel companies have been making over the years.”
Toyota has two plants near Bengaluru. The first plant has a capacity of 1 lakh units per year and the second has 2.10 lakh units per year. Fortuner and Innova are produced in the first plant while Etios, Liva, Yaris, Camry hybrid and Corolla are manufactured in the second unit.
Kavan Mukhtyar, partner and leader, automotive PwC India, said automakers do not have to fear about the quality of steel Indian manufacturers produce as they go through stringent quality control measures. “There are at least a few steel makers in India who are world class. So, it won’t be a challenge for them. For the others, if they bring in the right quality practices at the point of input, it should not be a huge issue for them to adopt international standards,” Mukhtyar said.
Mukhtyar also said there might be some impact on the input price but either the automaker or the supplier has to absorb the cost. “Pricing is a different conversation from quality. In many instances, MNCs have a global contract which allows them to drive down the price but domestic steel manufacturers can choose to be competitive,” he said.
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