The country’s tax regime is pushing companies to their limits. Especially the car industry, which has already been suffering, might have to face a harder blow as the government hike up taxes for luxury items that include cars. Companies like Toyota dither to make up their kind on whether to expand in the subcontinent.
Toyota Motor Corp. is one of the most acknowledged brands in the automobile industry, which has been operating in the country since the year 1997 in Brobdingnagian proportions. The Japanese backed auto tycoons have two plants on the suburbs of Bengaluru, where it makes cars and utility vehicle models such as the Etios, Innova, and Fortuner, which are largely popular among the masses of the country. Recently the news broke out that the car manufacturer had commented that they won’t be expanding in India citing the preposterous tax structure the government levied on cars.
Shekar Viswanathan, the vice-chairman of Toyota’s local unit, Toyota Kirloskar Motor, had come out saying that due to the government’s high tax structure on cars and motorbikes, companies are struggling and finding it hard to build on a large scale. He also added that the high levies are also made owning a car out of reach of many consumers, meaning factories are idled and jobs aren’t created. His comments were published in an article by the news agency Bloomberg.
Vishwanath had also said, “The message we are getting, after we have come here and invested money, is that we don’t want you,” in an interview that was also published in the same report. He also commented that if no change is made in the tax structure, the company would not scale up its business in India although stating that they would also not leave the country.
The U-turn:
Although hours after the news was circulated, the car company said that they remain committed to the Indian market and its local unit announced an investment of more than ₹ 2,000 crores.
Vikram Kirloskar, the vice-chairman of Toyota Kirloskar Motors, the local unit of Toyota, said in a post on Twitter, “The future of sustainable mobility is strong here in India and Toyota is proud to be part of this journey. We are investing 2000+ crore towards the electrification of vehicles.”
The company stressed the fact that India is an “integral part” of the company. The Japanese car manufacturer also expects that the Indian government to take steps to support the auto industry through tax cuts.
Toyota Kirloskar Motor in the statement said, “Toyota Kirloskar Motor would like to state that we continue to be committed to the Indian market and our operations in the country are an integral part of our global strategy. We need to protect the jobs we have created and we will do everything possible to achieve this. Over our two decades of operations in India, we have worked tirelessly to build a strong, competitive local supplier ecosystem and develop strong, capable human resources. Our first step is to ensure full capacity utilization of what we have created, and this will take time. In the wake of the slowdown that has been exaggerated by the Covid-19 impact, the auto industry has been requesting the government for support to sustain industry through a viable tax structure. We remain confident that the government will do everything possible to support the industry and employment.”
According to data by the Federation of Automobile Dealers Associations, the local unit of Toyota is owned 89% by the Japanese company and has a small market share — just 2.6% in August versus almost 5% a year earlier.
Prakash Javadekar, Minister of Heavy Industries, also twitted claiming that the news that Toyota would not expand is false. He said in his post on twitter, “The news that Toyota Company will stop investing in India is incorrect. Vikram Kirloskar has clarified that Toyota will invest more than Rs 2,000 crore in the next 12 months.”
https://twitter.com/PrakashJavdekar/status/1305852041865035776?ref_src=twsrc%5Etfw
Kirloskar tweeted, replying to the tweet saying, “Absolutely! We are investing 2000+ crores in electric components and technology for the domestic customer and export. We are committed to the future of India.”
https://twitter.com/vikramkirloskar/status/1305858222197288969?ref_src=twsrc%5Etfw