Toyota India decides to stop expansion: Here’s why!

Toyota's market share has gone down according to data shared by FADA and the talks of not investing further is going to hurt in a big fashion to the Make-in-India movement.

By:Updated: Sep 15, 2020 7:21 PM

In what will be a shocking blow to the Make-in-India movement, Toyota Kirloskar Motor has decided to not invest further. TKM which started operations in the country from 1997, has blamed the higher taxes on cars as the reason. Shekhar Viswanathan, vice chairman of TKM was quoted as saying by Bloomberg that the taxes are so high that companies find it hard to build scale. Due to the higher prices of cars, owning a car is out of reach for many a customer. This leads to factories being in an idle condition as well as lack of jobs thereon. Shekhar was quoted as saying that “The message we are getting after we have come here and invested money, is that we don’t want you.” He added that if there are no reforms, then Toyota might not exit the Indian market but will not scale up either.

Toyota’s market share in India has gone down according to data shared by the Federation of Automobile Dealers Association (FADA). FADA reports that while the share was five per cent in 2019, it is now down to 2.6. During the transition from BS4 to BS6, TKM had to let go of many car lines like the Etios, Etios Liva, Etios Cross, and the Corolla Altis. The Etios models were the preferred choice in the fleet market and having no replacement there yet is definitely going to hurt. Similarly, the Toyota Corolla Altis was a highly preferred sedan by the hotel industry. Moreover, Toyota India doesn’t have a smaller capacity diesel engine too.

It’s mainstay right now are the Innova Crysta as well as the Fortuner. Both these vehicles operate in the above Rs 15 lakh segment. Considering that motor vehicles in India are luxury items according to the government, they attract higher taxes. For example, the aforementioned two models have a 28 per cent tax duty on them. Depending on the size and variant, the taxes vary between 1-22 per cent. Electric vehicles in the meanwhile attract a lower five per cent taxes but Viswanathan feels that this will go up significantly once the demand increases.

At present, only 20 per cent of TKM’s factory capacity is being utilised. The pandemic has made conditions worse for every automaker in the country. The government is offering up to $23 billion including breaks on production and more. Moreover, foreign investment is being encouraged as well.

In all, Toyota’s statement might have a bearing on its all-new cars (not from Maruti Suzuki) in the country. This means we might have to wait longer for the C-HR, Highlander, and other related cars in the country. It definitely seems a long wait. Sigh!

Toyota Kirloskar Motor has issued a statement. It reads…

Toyota Kirloskar Motor would like to state that we continue to be committed to the Indian market and our operations in the country is 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 eco-system 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 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. We recognize the strong proactive efforts being made by the Government to support various sectors of the economy and appreciate the fact that it is open to examining this issue despite the current challenging revenue situation. Our recent partnership with Suzuki in India on sharing technology and best practices are also in support of the “Make in India” initiative and Indian Government’s policy, and aim to enhance the competitiveness of both companies.

 

Inputs from Bloomberg

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