Toyota won’t expand more in India: What does this mean?

One of the biggest manufacturers in the world, Toyota Motor Corp. has said that they will not expand anymore in India due to the high taxes regime of the country. The new development comes at a time when the central government is pushing for “Make in India” and is inviting foreign brands to invest in India.

Shekhar Viswanathan, vice chairman of Toyota Kirloskar Motor, has said that the government keeps high taxes on cars and motorcycles, which is why it is difficult to build scale businesses in India. The high taxes also keep vehicles out of the reach of many, which in turn causes low demand and idle factories and loss of job creation as per ET Auto. He even said that the current taxes give a “we don’t want you” feeling. However, Vishwanath has also said that in case of absence of any reforms, Toyota will not exit the Indian market but the brand will not scape up India operations.

The central government is planning to shell out incentives worth $23 billion to attract manufacturers to set-up plans in India and create new jobs. General Motors who was present in the Indian market with the Chevrolet brand packed its bags in 2017 and left the country. Ford Motor Company, which has been present in India for more than two decades, joined hands with Mahindra and Mahindra after failing to attract customers. There are similar rumours about the Harley-Davidson India, which is planning to shut down its Bawal, Harayana plant due to extremely low demand in India.

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Nitin Gadkari, Union Minister of Road Transport and Highways in India even invited Elon Musk to set-up a factory in India but due to the tax regime, Musk chose China. Elon Musk said that many countries allow the manufacturers to pay in part for the local factory by selling cars there ahead of time. It also allows the manufacturer to get a sense of demand. However, the current rules prevent that in India.

Toyota upset over tax and policies

Shekhar Viswanathan earlier showed by dismay over the taxes too. In 2016, when diesel vehicles were not allowed to sell in Delhi-NCR due to rising pollution, a supreme court order added 1 per cent tax on the value of the diesel vehicles. Vishwanathan said back then that “It is only in India that the incidence of taxes on cars is extremely high” to Business Standard.

In 2017, when the central government was pushing for electric vehicles and gave a deadline of 2030 to make India an electric vehicle-only nation, Shekar Vishwanathan said that it should be the consumers who should get the freedom to make logical choice and manufacturers enough leeway to produce according to the need of the consumers. The all-electric vehicle plan was later scrapped by the government as per an interview on Business Standard.

Toyota is not alone, R.C. Bhargava, Chairman, Maruti Suzuki India said in August that tax on cars in India is far higher than any other car manufacturing country in the world, according to LiveMint

Toyota’s current plans in India

Toyota and Suzuki joined hands on the global level to manufacture, develop and launch new cars around the world. In India, we saw the launch of the rebadged version of the Maruti Suzuki Baleno as the Toyota Glanza. Also, the brand will launch its second rebagded product – the Urban Cruiser, which is based on the Maruti Suzuki Vitara Brezza. The brand is also working to launch the new Fortuner facelift to the Indian market. Before the launch of the Glanza, Toyota was heavily dependent on the sales of the Innova Crysta and the Fortuner in India and both these vehicles are one of the highest-grossing vehicles from the brand.

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