“When you look at the market closely, you can see that there is demand coming back. People are shifting to personal mobility for safety reasons. However, it is difficult to predict the consumer psychology which is changing every day. The market will speak for itself,” says Naveen Soni, Sr. Vice-President, Sales & Services at Toyota Kirloskar Motor. Excerpts:

Dealerships are opening up and at the same time plants are not working at full capacity (in terms of workforce) due to social distancing norms. Unexpected production shutdowns are also happening due to Covid-19 positive cases. How are you managing the production-demand mismatch?

It is difficult to gauge demand at this point in time. Even if a dealership opens its doors today, there is no guarantee it will be open tomorrow. In the same way, not all customers who book cars with us today will take delivery immediately. Some would like to wait. We will have to dig deep into our experience to locate some pattern from the past to help us predict the present. But the difficult part is, there was nothing like Covid-19 in the past. This has given us reason to be agile, alert and responsive to the market. Speed is of essence.

The number of dealerships open is just the quantity. The quality is the percentage of business coming out of these dealerships as a percentage of the total business that would have come otherwise. What the plant needs to know is how many dealerships are open, where they are open, and what is the kind of business they are getting. Toyota works on a pull system where we try to define what is required for the market based on which the assembly line works. So, to read the market requires more experience and maturity; after that, to align the production is easier.

How are you managing inventory at the dealership level in these times of uncertainty?

There is no change in our style of inventory management. At Toyota, we work on a lean inventory model. The Japanese word we use is ‘heijunka’, which means ‘levelled up’ throughout the system. At no place — whether it is work-in-progress, finished goods or parts inventory — there should be a pile-up. We call pile-up in Japanese ‘muda’, meaning ‘waste’.

If you have an inventory pile-up, it is nothing but a waste. It is a drain on your profitability. So, from that point of view, it is very important to read the market and work on the pull system. The market pulls whatever it requires from the production and production pulls that from the vendors. And every layer ― whether it is tier 1 or tier 2 supplier or manufacturer or dealer ― we have tried to keep minimum inventory throughout the system, and at the same time not compromising on customer satisfaction. So coming to your specific question on finished goods inventory, we have always kept dealer inventory at less than two weeks of stock (physical) plus maximum of a week in transit stock. We have not changed anything.

Crisil foresees an over 20 per cent decline in passenger vehicle sales in 2020-21. Do you agree?

Looking at the demand that is coming from the dealerships that are open, it seems that this may not be true. However, it is easier to make these judgements over a period of time. When you look at the market closely, you can see that there is demand coming back. People are shifting to personal mobility for safety reasons. It is difficult to predict the consumer psychology which is changing every day. The market will speak for itself. We are trying to gauge the market and respond as quickly as possible, as much as possible, wherever it is possible. Toyota’s principles guide us to produce what is required, where it is required and when it is required.

Covid-19 has forced companies to have more digital touch points. Will digitisation of the sales process be a trend to watch out for in the future?

I buy into that logic that customers would like to stay safe in these times. Having said that, how much they would be taking this as a long-term adjustment to their buying patterns needs to be seen. I am not denying the need for digital connect. But when the customer buys a product, the best way is to see that and then get the product he desires. If the total sales goes down, the percentage of sales coming from digital, even if it is constant, starts going up. If the total sales increase and the digital sales also increase in the same ratio then we can say that there is an increase in digital sales and it is a new trend. For us, 5-7 per cent was coming from digital market, so that continues. If it goes to 20-25 per cent in these times of the lockdown, and then continues to stay at the same level afterwards, then we can say that customer behaviour has changed.

Today, the need of the hour is customer touch points have to be digitised as much as possible and we have also done that. We do demonstrations, test drives and deliveries at home.

It is said that the value segment cars may do better than big cars this year due to reasons such as pay-cuts. For Toyota, there is no production of the Etios or the Liva currently. Do you think you will be losing out on cashing in on the demand for smaller cars?

I don’t think we will be losing out. We have alternate products. Instead of the Liva, we have the Glanza. Instead of the Etios, we have the Yaris. I don’t think I am at a product disadvantage because of the current situation. However, having said that, does the customer have to see the same products in the same category or do I attract them to a new segment because of the product quality that I offer? So, these are things we have to value and I don’t see any disadvantage.

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