Toyota says it remains committed to investing in India, a day after stating expansion stifled due to high taxes

September 18, 2020

Now you say it, now you don’t. Two days ago, it was reported that Toyota was not planning to expand its business in India because of the high taxes imposed on motor vehicles. This, according to Shekar Viswanathan, vice chairman of Toyota’s local unit, Toyota Kirloskar Motor, made it difficult for companies to build scale.

In an interview with Bloomberg, he stated the negative impact high levies were having on the auto industry. “Punitive taxes discourage foreign investment, erode automakers’ margins and make the cost of launching new products ‘prohibitive’. You’d think the auto sector is making drugs or liquor,” he said.

“The message we are getting after we have come here and invested money, is that we don’t want you,” he said. He added that in the absence of reforms, the brand “won’t exit India, but we won’t scale up.”

Following the report, the company came out with a statement saying it remained committed to the Indian market, and this was followed by a tweet from the country’s union minister Prakash Javadekar, saying that the news of Toyota halting its investment in India was incorrect. Later, vice-chairman Vikram Kirloskar announced the Toyota Kirloskar – which is 80% owned by Toyota – would be investing Rs 2,000 crore (RM1.12 billion) ino expansion over the next year.

The country’s taxes on motor vehicles, which includes cars, two-wheelers and sports utility vehicles can go as high as 28%. In addition to that, there can be further levies ranging from 1% to as much as 22%, based on a car’s type, length or engine size. The tax on a four-meter long SUV with an engine capacity of more than 1,500 cc works out to be as high as 50%, the Bloomberg report indicated.

With such taxes, automakers have struggled to expand in the world’s fourth-biggest car market, but the country is reportedly planning to offer incentives worth US$23 billion (RM95 billion) to attract companies to set up manufacturing. The incentives would also include production-linked breaks for automakers, sources told the publication.

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