Indonesian experience helps to get better idea of the market

Japanese carmaker Toyota Motor Corp. has made Indonesia and Thailand its bases for IMV (Innovative International Multi- purpose Vehicle) production in Southeast Asia. Starting in April, the company began increasing its production capacity in both countries for exports to 100,000 and 350,000 units respectively. In conjunction with the Tokyo Motor Show, groups of journalists, including The Jakarta Post's Primastuti Handayani, interviewed Toyota's President Katsuaki Watanabe and the company's Senior Managing Director for Asia, Oceania and Middle East Operations Group Akira Okabe. The following are the key points from the interview:

Question: In terms of investment, why do you prioritize Thailand more than Indonesia, considering that Indonesia has a long history with Toyota?

Katsuaki Watanabe (KW): We have a long history operating in Indonesia and we have been doing very well in the country. We have the IMV project in Indonesia. We have invested and have been expending our operation in the country.

Please, always keep in mind what is the demand of the local market in the future and that is the basis of our production.

What is your plan for Indonesia in the next five years?

KW: I don't have the concrete figure that I can share with you at the moment, because that is considered as a confidential information for the company. So, that is hard for me to cite the concrete number.

But as far as Indonesia's operation is concerned, we have -- under the IMV project -- produced with Daihatsu, the Avanza and Xenia vehicles, respectively.

In the context of IMV, Indonesia is regarded as a very important production base for those vehicles, including Kijang Innova.

Does the recent economic condition, sparked with high prices, influence Toyota's production policies?

KW: At the moment, skyrocketing oil prices or soaring materials prices have not directly impacted our production or costs. That is not the case at the moment. But if the high oil prices remain for a long time, that will impact the entire world economy.

Should that be the case, of course, that will have negative implications in many aspects and I'm concerned with the possibility.

In accordance with that, can Toyota as the number two carmaker in the world interfere with the OPEC (Organization of Petroleum Exporting Countries) pricing policy?

Akira Okabe (AO): As many economists have said, the current level of oil prices is not like before. In a sense, the impact should not be so big. So, there's no need to change the policy.

But, following the Toyota Way (the company's 14 foundational management principles behind its 'lean-production' system), we should consider which is good for the environment and good for fuel efficiency.

Do you see the possibility of hybrid cars being produced outside Japan to cut costs? Perhaps in other Asian countries?

KW: I think Asian countries could be potential candidates (for the production). But at the moment, it's difficult for the hybrid cars to be produced overseas because they require very sophisticated materials, sophisticated machine activities.

Even in Japan, it's difficult to produce those components. We are working and operating under very limited resources in that context. As the volume of hybrid cars increases, it may be possible to assemble those vehicles in other parts of the world.

How do you see Toyota in the next five years, in terms of capturing the market for hybrid cars in the world?

KW: Our plan next year is to produce and sell around 400,000 units. By 2010, we plan to produce about one million hybrid cars.

Who is your biggest competitor for Toyota in Indonesia?

AO: The Toyota Way encourages us to always get new ideas. The competitor is ourselves. If we are satisfied with ourselves, that is a big problem. So, (we) always improve ourselves.

For the last 25 years, Indonesia's market has been given the Kijang with simple technology, compared to other carmakers which already offered more advanced technology. Why?

AO: Every vehicle has its own character, given by the makers based on customer demand, such as Lexus, Crown, Kijang Innova and Avanza. We should always follow the mainstream of the industry. Kijang has long been identified with Indonesian people.

But a Kijang is no longer affordable for Indonesians...

AO: That's why we introduced the Avanza.

Is it true that you are using Indonesia as a pilot project for that kind of market?

AO: That's our aim, but having Indonesia's experience is very good for us, to get the idea of the market. We very (much) appreciate Indonesia.