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Toyota puts brake on India expansion

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Automaker Toyota has said that it will not expand further in India. Toyota has blamed India’s high taxation rates behind its decision.

The company has clarified that it has no plans to exit India, but added that there is no scope to expand its business.

The development comes at a time when India is pushing hard to attract companies to manufacture in India under the ‘Make in India’ initiative.

High taxes impacting sales

In an article by Bloomberg, Toyota Kirloskar Motor Vice Chairman Shekar Vishwanathan said the government has imposed high taxes on cars and motorbikes in the country, making it hard for the companies to build units.

Vishwanathan also said that the high taxes are also impacting its sales as many consumers are unable to pay such high prices for purchasing a car. This, in turn, has idled factories and hampered job creation.

“The message we are getting, after we have come here and invested money, is that we don’t want you,” he said.

While Toyota will not exit India, Vishwanathan added that there is no scope of scaling up its business.

Toyota started India operations in 1997

Toyota, which is one of the world’s biggest carmakers, started operations in India in 1997. Toyota’s local unit, Toyota Kirloskar Motor, is owned 89 per cent by the Japanese parent company, Toyota Motor Corporation.

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The company’s market share in India has come down to 2.6 per cent in August 2020 in comparison to nearly 5 per cent in the previous year. The market share is as per the Federation of Automobile Dealers Associations.

High taxes discourage foreign investment

The Bloomberg report highlighted the high taxes on cars, two-wheelers and sports utility vehicles (SUVs) in India. All of them attract 28 per cent taxes besides an additional levy — ranging from 1 per cent to as much as 22 per cent — based on the car’s type, length and engine size.

It may be noted that a tax on a four-meter long SUV with an engine capacity of more than 1,500 cc is as high as 50 per cent in India.

The government had earlier imposed high additional levies on goods that are considered to be a luxury. Items that are considered a luxury in India include cars, cigarettes and even sparkling water.

Vishwanathan said that such punitive taxes “discourage” foreign investment and erode automakers’ margins. He added that these taxes directly impact the cost of launching new products.

 

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