Toyota halts India expansion over high tax regime

Bloomberg

Toyota Motor Corp won’t expand further in India due to the country’s high tax regime, a blow for Prime Minister Narendra Modi, who’s trying to lure global companies to offset
the deep economic malaise brought on by the coronavirus pandemic. The government keeps taxes on cars and motorbikes so high 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 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 said in an interview. In the absence of any reforms, “we won’t exit India, but we won’t scale up.”
Toyota, one of the world’s biggest carmakers, began 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 versus
almost 5% a year earlier, Federation of Automobile Dealers Associations data show.
In India, motor vehicles including cars, two-wheelers
and sports utility vehicles (although not electric vehicles), attract taxes as high as 28%. On top of that there can be additional 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 more than 1500 cc works out to be as high as 50%.
The additional levies are typically imposed on what are considered to be “luxury” goods. As well as cars, in India that can
include sparkling water.
India is planning to offer incentives worth $23 billion to attract firms to set up manufacturing, people familiar with the matter said last week, including production-linked breaks for automakers. International automakers have struggled to expand in the world’s fourth-biggest car market.
General Motors quit the country in 2017 while Ford Motor agreed last year to move most of its assets in India into a joint venture with Mahindra & Mahindra after struggling for more than two decades to win over buyers.