The automobile industry giant Toyota India has recently said in a statement that it has held back on its expansion plan in the country. It is estimated that these plans were worth between 2000 to 3000 crore rupees. A high-level executive of the group said the reason behind this step is the increasing rates of taxes being levied on the automobile industry.
Shekar Viswanathan, the vice-chairman of Toyota Kirloskar Motor said,
“The government keeps taxes on cars and motorbikes so high that companies find it hard to build scale.” He also added, “The high levies also put owning a car out of reach of many consumers, meaning factories are idled and jobs aren’t created.”
Other Automobile companies seem to agree with Toyota
Meanwhile, competitors of Toyota seem to agree with its stance on the situation. We have seen in the past that companies like Ford and GM have quit the Indian auto market with a shortage of customer demand. With the constant increase in the tax rates, in the coming years, many other companies may follow suit.
According to many industry experts, most auto companies are already in the phase of reducing and restricting their expansion capital. This is due to the financial crisis caused by the impact of the outbreak of the COVID-19. So the increased taxes combined with already reduced revenue could be a recipe for disaster for the automobile sector in India.
Impact of these high Taxes on the Industry and the Economy
This move from Toyota comes as a major setback to the government’s recent expansion plans and incentives. We recently saw that the Narendra Modi government announced incentives worth 23 billion dollars to foreign companies to set up their manufacturing and production units in the country. But if the government fails to retain and satisfy the existing companies, the effects will be counterproductive on the economy.
So what are the Future Plans of Toyota?
After suspending its current plans of expansion in India, Toyota plans to operate at the same level for the time being. Shekar said in an interview that,
“The message we are getting after we have come here and invested money, is that we don’t want you.”
The company hopes for some kind of government reform or relief to compensate for the high taxes. But in lack of any consideration from the government, Toyota “won’t exit India, but we won’t scale up” finished Vishwanathan.
What should the Government do now?
Many top industry experts suggest that its high time that the government compares the tax structure here with the global standards and takes the necessary steps to bring them down. Indian tax rates on vehicles are among the highest rates in the world.
Its believed that with lower taxes, there will be a substantial amount of increase in the revenue by an increase in the number of sales. This also has the potential to create a high job rate in the industry. Many people from the industry are of the opinion that a low tax structure in the automobile industry will be more beneficial to both the companies and the government.