Toyota Motor won’t expand any more in India due to the country’s high tax regime, a blow for Prime Minister Narendra Modi, as India continues to attract global companies to offset the economic downfall caused by the coronavirus crisis.
The government keeps taxes on cars and motorbikes high enough that companies find it hard to build scale, said Shekar Viswanathan, vice chairman of Toyota’s local unit, Toyota Kirloskar Motor. The high levies also put owning a vehicle out of reach of many consumers, which leads the factories to idle and lack of creation of 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 said in an interview. He added that in the absence of any reforms, “we won’t exit India, but we won’t scale up”.
Toyota, one of the world’s biggest automakers, started operating in India in 1997. Its local unit is owned 89% by the Japanese company and has a small market share — just 2.6% in August against nearly 5% a year ago, Federation of Automobile Dealers Associations data show.
In India, motor vehicles including cars, two-wheelers, and sports utility vehicles (not including electric vehicles), attract taxes as high as 28%. On top of that, there can be extra 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 over 1500 cc works out to be as high as 50%.