In a blow to Prime Minister Narendra Modi's call for "vocal for local", Toyota Motor Corp, one of the world’s biggest carmakers, has put brakes on its expansion plans in India due to the country’s high tax regime. The government keeps taxes on cars and motorbikes so high that companies find it hard to build scale, Bloomberg quoted Shekar Viswanathan, vice chairman of Toyota’s local unit, Toyota Kirloskar Motor, as saying.
The high levies also put owning a car out of reach of many consumers, meaning factories are idled and jobs aren’t created, he said. “The message we are getting, after we have come here and invested money, is that we don’t want you,” Viswanathan told Bloomberg. In the absence of any reforms, “we won’t exit India, but we won’t scale up.”
Toyota began operating in India in 1997. Its local unit is owned 89 per cent by the Japanese company and has a small market share—just 2.6 per cent in August versus almost 5 per cent a year earlier.
In India, motor vehicles including cars, two-wheelers and sports utility vehicles (although not electric vehicles), attract taxes as high as 28 per cent. On top of that there can be additional levies, ranging from 1 per cent to as much as 22 per cent, based on a car’s type, length or engine size. The tax on a four-metre long SUV with an engine capacity of more than 1500 cc works out to be as high as 50 per cent.
To top it all, India's automobile sector has been witnessing a fall in sales since the previous financial year. The situation has been compounded by the pandemic-induced lockdowns and economic slump. After near-zero sales in April, the sales have begun to recover gradually.