Toyota considering new diesel engine plant in India

With demand increasing for diesel-powered vehicles and almost 80% of its sales coming from vehicles powered by this fuel, Japanese carmaker Toyota is considering setting up a new diesel engine facility to cater to the Indian market.

Toyota owns 89% in the Indian joint venture, Toyota Kirloskar Motor's (TKM). Its plans to set up a diesel engine plant has been delayed by the lack of clarity in pricing policy of the automotive fuels by the government and uncertainty over any additional tax on diesel-fired vehicles.

TKM deputy managing director (marketing) Sandeep Singh said, at the launch of Camry in Delhi on Friday, "Indian market is dynamically shifting towards diesel cars and forms bulk of our domestic sales. We have been conducting feasibility study on the potential of diesel engines in the Indian market, but are yet to take a final decision on any such facility."

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TKM is currently investing 500 crore to set up a petrol engine plant and expanding its transmissions capacity in its facility at Bidadi in Bangalore. The company's investment in a new diesel plant could be much higher. Toyota's high volume models like the Innova, Etios and Fortuner SUV are primarily diesel-powered cars. Currently, it imports all its engines from Japan and Thailand, but has been vying for a local facility to bring down costs in the light of adverse currency fluctuations and the consequent mounting of import bill.

"We have taken a huge hit on our margins with the double whammy of weakening Rupee and the strong Japanese Yen. We have plans to localise production for most of the components, but are awaiting a final nod from our headquarters in Japan," Singh added.

Toyota and other carmakers like Hyundai and Volkswagen have been considering setting up diesel engine plants for India, but have been postponing a decision because of the Indian government's lopsided stand. The union government had planned to levy additional tax on diesel passenger vehicles to discourage their sales and also prevent use of subsidised diesel fuel to luxury cars and SUV's. However, no such decision has been taken yet.

Toyota also started the production of seventh generation premium sedan Camry at Bangalore and launched the new car at an introductory price of Rs 23.80 lakh (ex-showroom Delhi). The company had been importing the car from Japan earlier and now would assemble the car to reduce the high 120% duty on imported vehicles. Camry would be available only in one automatic transmission variant that is powered by a 2.5 litre petrol dual VVT-i engine generating 181PS of power. The new Camry will compete with Honda's Accord, Volkswagen's Passat and Skoda's Superb would be sold only in petrol option.