Japanese automobile major Toyota Motors has reportedly halted its expansion plans in India and has blamed India’s high tax regime for the same. In an interview with Bloomberg, Shekar Viswanathan, vice chairman of Toyota’s Indian arm Toyota Kirloskar Motor said that the company is getting the message that India doesn’t want them since the government levies high taxes on cars and motorbikes, making scalability a challenge.
“The message we are getting, after we have come here and invested money, is that we don’t want you. We won’t exit India, but we won’t scale up,” Shekhar reportedly said in the interview.
Toyota began operations in India in 1997 with an 89% stake in Toyota Kirloskar Motor. However, it only holds a 2.6% market share in India’s automobile industry.
Motor vehicles such as cars, two-wheelers and sports utility vehicles attract around 28% taxes. According to the Bloomberg report, there are also additional levies on a car based on its type, length and engine size and can range anywhere between 1-22%. “The tax on a four-meter long SUV with an engine capacity of more than 1500 cc works out to be as high as 50%,” the report states.
Shekhar told Bloomberg that such high taxes impact the margins of automakers, dissuades them from investing in India, and makes the cost of new product launches ‘prohibitive’.
“You’d think the auto sector is making drugs or liquor,” he reportedly said.
He further added that politicians and bureaucrats in India don’t understand that there needs to be a market for a product if the government wants the company to make it in India… yet “at the slightest sign of a product doing well, they slap it with a higher and higher tax rate,” Bloomberg quotes him as saying.
He also added that high levies also keep cars out of reach of many consumers, which again impacts job creation and factory production.
Following the Bloomberg report, Toyota Kirloskar said in a statement that it remain committed to the Indian market.
"In wake of the slowdown that has been exaggerated by the Covid-19 impact, the auto industry has been requesting the Government for support to sustain industry through a viable tax structure," the statement said.
"We remain confident that the government will do everything possible to support industry and employment. We recognise the strong proactive efforts being made by the Government to support various sectors of the economy and appreciate the fact that it is open to examine this issue despite the current challenging revenue situation."
In India, Toyota has reportedly pivoted to mainly making hybrid vehicles and since these vehicles are not purely electric, they’re levied a tax of 43%. However, electric cars are yet to see widespread adoption in India.
Earlier, Elon Musk, founder of Tesla said on Twitter once that import duties would make Tesla’s vehicles unaffordable in India.
A few other automobile companies too have exited India after failing to capture the market. While General Motors exited in 2017, Ford moved most of its assets into a joint venture with Mahindra, putting an end to its independent operations here.
With IANS inputs