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Toyota suspends expansion in India with excessively high car tax rates
Sep 16,2020 09:22CST
The content below was translated by Tencent automatically for reference.

SMM: it is reported that Toyota will not expand further in India because of India's high tax system, which is a blow to Indian Prime Minister Narendra Modi (Narendra Modi). At present, Modi is trying to attract global companies to invest in India in order to combat the serious economic difficulties caused by the novel coronavirus pandemic.

High car tax rate

In India, motor vehicles (excluding electric vehicles), including cars, two-wheelers and SUV, are taxed at a tax rate of 28 per cent. In addition, depending on the type, length or engine displacement of the car, the vehicle may face additional taxes ranging from 1% to 22%. The tax rate can even be as high as 4000 per cent for a SUV, with a car length of 4000 mm and an engine displacement of more than 1.5L. Currently, electric vehicles are taxed at 5% in India. Viswanathan said that after the increase in sales, the Indian government is also likely to raise the tax rate on electric vehicles.

Earlier this month, Indian Minister of heavy Industry Prakash Javadekar said that although tax cuts are being discussed among ministries, no agreement on actual tax cuts may be reached in the near future. A spokesman for India's finance ministry did not immediately respond to a request for comment.

Shekar Viswanathan, vice chairman of Toyota's Indian subsidiary Toyota Kirloskar Motor, said the Indian government's taxes on cars and motorcycles were too high, making it difficult for companies to expand production. High tax rates also make it difficult for consumers to buy cars, which means that automakers' factories are idle and unable to create more jobs.

"after we came to India and made investments, the message we received was'We don't need you anymore,'we don't see any signs of reform, we will not withdraw from India, but we will not expand," Viswanathan said in an interview. Viswanathan said India's tough taxes discouraged foreign investment, eroded carmakers' profit margins and made the cost of launching new products "prohibitive".

Toyota's second plant in India currently has only about 20% capacity utilisation. Toyota has also formed an alliance with Suzuki to sell some of Suzuki's small cars. Toyota, which began operating in India in 1997, won only 2.6 per cent of the Indian car market in August, compared with 5 per cent in the same period last year, according to the Federation of Indian car Dealers Associations.

Indian market precedes Indian factories

Before the outbreak, car sales in India had been in the doldrums, resulting in the loss of at least 500000 jobs. One lobby group predicts that new car sales in India could take four years to return to pre-slowdown levels.

India's top-selling carmakers are Suzuki and Hyundai, which dominate India's compact and economical car market and together control nearly 70 per cent of the Indian market. Toyota has undergone a transformation in India, selling mainly hybrid vehicles, with a tax rate of 43% because hybrids are not pure electric vehicles. At the same time, electric and hybrid cars are not popular in India, where few people can afford cars, let alone consumers willing to buy environmentally friendly vehicles. Earlier, Tesla founder Elon Musk (Elon Musk) had said that India's import tariffs would lead to the high price of Tesla vehicles in the country.

Last week, sources revealed that India was planning to launch a $23 billion incentive scheme to attract companies to set up manufacturing operations in the country, including production-related discounts for car companies. India is the fourth largest car market in the world, and many international car companies are trying to expand in this market.

"the Indian market is always ahead of Indian factories, but politicians and bureaucrats don't understand this," Viswanathan said. " Mr Modi's much-hyped "made in India" (Make in India), is another plan to attract foreign companies. "India needs to have demand for products before companies can come here to build factories, but as soon as a product shows signs of good, they will impose higher and higher tax rates on it," Viswanathan said. "

GM withdrew from the Indian market in 2017. Ford has said it hopes to make India its third-largest market in the world by 2020. However, after more than 20 years of hard work, the company finally agreed to transfer most of its assets in India to a joint venture with Mahindra, effectively ending Ford's independent operations in India.

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