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Toyota Halts India Growth Due To High Tax Regime

Bangalore: The Toyota Motor Corp. won’t expand further in India due to high tax regime, a setback for Prime Minister Narendra Modi’s efforts who is trying to pull the global companies to offset the economic discomfort caused by COVID-19.

The vice-chairman of Toyota’s local unit Shekhar Vishwanathan said that the government keeps taxes on cars and motorbikes as high as 28% which the companies find it difficult to build scale.

He added that the high taxes put owning a car out of reach for many consumers which means that factories are left idled and jobs are not created.

Vishwanathan said, “The message we are getting after we have come here and invested money, is that we don’t want you,” Viswanathan said in an interview. In the absence of any reforms, “we won’t exit India, but we won’t scale up,” was quoted as saying by The Print.

Toyota is the world’s biggest manufacturers of cars. It began its functioning in India during 1997. Its local unit is owned by a Japanese company with 89% share. It also has a small market share- just 2.6 in August while, it was five percent in the previous year according to the data by the Federation of Automobile Dealers Associations.

The motor car vehicles which includes cars, two-wheelers as well as sports utility vehicles (excluding electric vehicles) attract taxes up to 28%. Also, there are additional taxes which ranges from one percent to 22% which is based on the car’s length, type or engine size.

Basically, the additional levies are imposed on “luxury” goods. The international automakers have strived to expand in the world’s fourth-biggest car market.

Although, India is also planning to provide incentives worth $23 billion in order to attract the companies to set up their manufacturing.

“You’d think the auto sector is making drugs or liquor,” he said. Toyota also has an alliance with Suzuki Motor Corp. to sell some compact cars of Suzuki under its own brand which is currently utilising just 20% of its capacity in its second plant in India.

As Toyota’s cars in India has largely turned towards hybrid vehicles which can attract the taxes as much as 43% because they are not fully electric.

Also, Elon Musk, the founder of electric car manufacturing company Tesla said that the import duties will make his vehicles unaffordable in India.

“Market India always has to precede Factory India, and this is something the politicians and bureaucrats don’t understand,” Viswanathan said.

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