Workers at Toyota Kirloskar’s two plants near Bangalore are taking longer breaks these days — plummeting auto sales have left them with less to do during their eight-hour shifts .

Last month, sales dropped 35 per cent to 10,035 units compared with the same period a year ago. If the situation continues, Toyota Kirloskar, a joint venture between Toyota and the Kirloskar Group, may end up with sales of 1.8 lakh to 2 lakh units in 2013-14, including peak season sales.

This will be 18 per cent lower than the previous year.

Coupled with wild swings in foreign exchange rates, the falling sales are expected to see Toyota post a loss this fiscal in its Indian operations, according to people close to the company.

It will be the carmaker’s first loss-making year in over a decade. Toyota holds 89 per cent in the venture while the rest is with the Kirloskar Group.

The losses are estimated between Rs 150 crore and Rs 180 crore on a turnover of Rs 14,000 crore, about the same as the previous year, as per data from analysts tracking the company.

Exchange rate effect

Speaking to Business Line, Toyota Kirloskar Vice-Chairman Shekar Viswanathan said that the company had based its estimates for the fiscal year at about Rs 46 to a dollar. But since then the rupee has been on a downward spiral, even breaching the Rs 60-mark this week.

The sharp fall in the rupee’s value has left the company vulnerable to exchange-rate fluctuations and higher input costs. For instance, the diesel engines for its Etios cars are imported from Japan, pointed out Viswanathan.

“The Government did its bit by raising the excise on multi-utility vehicles (MUV) between three per cent and 30 per cent,” he added.

Toyota produces the Innova MUV, Corolla sedan, Etios sedan, Etios Liva hatchback and Fortuner sports utility vehicle at its Indian plants.

Layoffs expected

Floor workers at the two factories, who constitute a large part of the 6,000-odd workforce, fear they may be laid off.

But contract workers, who are mostly involved in loading and unloading operations, have been first in the firing line. During the last few months, their numbers have dwindled from about 1,200 to 800. More may be asked to leave soon.

“We are not letting go any permanent workers yet, even though we have been facing very difficult market conditions,” said Viswanathan.

He added that the company has gone in for cost cutting. Across the board, there will be no increments for employees this year. The average increment ranged between 12 per cent and 15 per cent during the good times.

Toyota Kirloskar is not the only auto company that is suffering from a decline in sales. The overall domestic passenger car market itself has shrunk 16 per cent between January and May this year.

Etios disappoints

Some analysts have said that Toyota’s pain point has been the rather dismal performance of the Etios sedan and the Etios Liva hatchback, both of which are nearly two years old. They have already had their first makeover in March this year.

Viswanathan conceded that the Etios has not met its desired financial objectives. He said this was not because the models had failed but because the B-segment in which they feature has been tough to navigate. “The competition is high because all brands competing in the segment are more or less similar in features and quality,” he noted.

giriprakash.k@thehindu.co.in

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