Toyota India has clarified that it is looking to invest Rs 2,000 crore to Rs 3000 crore in technology expansion after a senior executive at the company said that Toyota has put expansion plans on hold due to high taxes in the country.
"The government keeps taxes on cars and motorbikes so high that companies find it hard to build scale. The message we are getting, after we have come here and invested money, is that we don't want you. We won’t exit India, but we won’t scale up," Shekhar Viswanathan, Vice Chairman, Toyota Kirloskar Motor said.
Viswananthan's statement comes as a setback in the government's efforts to boost local manufacturing. Speaking to CNBC-TV18, Vikram Kirloskar, Chairman of Toyota Kirloskar Motor said, "We feel quite welcome in India and we have worked tirelessly in India. Toyota is quite committed to India in the long run. The market is very tough but we are seeing a daily improvement in retail sales. We are investing Rs 2,000-3,000 crore in technology expansion."
Hour's after Kirloskar's interview with CNBC-TV18, Union Minister for Heavy Industries Prakash Javadekar clarified on Twitter:
Meanwhile, Kirloskar added that the company was not looking to expand manufacturing capacity and the priority was to utilize current capacity levels.
However, top automobile industry executives agree that the government should reduce taxes on vehicles. "It's time to look at global tax structures. Taxes on Indian vehicles are among the highest in the world. The government can meet revenue targets by higher sales volumes, driven by lower taxes. A low tax structure would create demand and more jobs," said an industry executive who did not wish to be named.
India's auto sector has been arguing for 18 percent GST on all automobile categories instead of the existing 28 percent. Top executives in the auto sector argue that a 28 percent GST rate, coupled with cess which could range from 1 to 22 percent and state road tax can put a lot of financial burden on customers.
Kirloskar said that while a GST reduction was impossible at this stage, the government could look at reviewing tax rates on green vehicles like hybrid and CNG. "We need to look at tax structures based on carbon reduction. We can have incentives for reduction in fuel consumption," he said. Kirloskar added that the auto sector needs a clear 15-year roadmap to decide on future investments.
Industry sources also said that all automobile companies are in the process of reducing capital expenditure due to the financial impact of the COVID-19 pandemic. "Further expansion and investments are contingent on sales volumes reaching 2018 levels," said an industry executive.