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Old 15th September 2020, 06:59   #1
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Default Toyota halts India expansion, blames ‘We Don’t Want You’ taxes

An interesting article from Bloomberg, quoting the Vice Chairman of Toyota India stating that they will halt further investments in India due to the government’s inconsistent tax policies.

Toyota Halts India Growth, Blaming ‘We Don’t Want You’ Taxes - Bloomberg-Quint

“The message we are getting, after we have come here and invested money, is that we don’t want you,” Vishwanathan said. In the absence of any reforms, “we won’t exit India, but we won’t scale up.”

The article goes on to talk about the high level of GST on cars (particularly above 4 metres /1500 cc), which “discourage foreign investment, erode margins, and make the cost of launching new products prohibitive.”

“You’d think the auto sector is making drugs or liquor”, Vishwanathan said.
I agree with the views expressed here. Our policies on the auto sector have been clearly wrong, and prevented India from emerging as either a global demand centre or as a hub for global sales. High import duties have turned India into a profit island for select manufacturers who make poor quality, unsafe, Made for India cars - which cannot be sold anywhere else, while shielding them from new entrants who would need to use their global scale to compete.

The exit of GM, Ford, Fiat (as a brand), and a public statement from a senior officer (in a world where companies tend to be discreet and public criticism is not welcome) is the harbinger of things to come.

Would appreciate thoughts below - but please comment on policies and not on politicians. The fact is that poor policies on autos has been a bipartisan problem - and state governments of all parties that hike road taxes have also played a key role.

Last edited by Gannu_1 : 16th September 2020 at 08:11. Reason: Added quotes for better readability of bits from the article, fixed broken URL.
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Old 15th September 2020, 07:21   #2
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Default re: Toyota halts India expansion, blames ‘We Don’t Want You’ taxes

This is quite sad. We as a nation still have not made the transition to encourage and appreciate wealth creators. We still think any money made / earned is done through illegal means. To be sure, this was how 95% of money was made by the business class for 50+ years.

However, over the last 20 years, we've had a new class of globally qualified salaried individuals who earn a significant sum of money and are a keen consumption class. Still a small segment (~50M consumers) but growing for sure. Unfortunately, this class has very little to no influence or voice or visibility among the political class and society in general. So taxing / rinsing this class to the last rupee is convenient for all parties, be it a guy in a chawl or a typical "businessman" (both of whom claim INR 15,000 in income, incidentally).

The best example of this? RTO tax on luxury cars is at 20%, but capped at INR 20 lacs in Maharashtra. Who gets affected? The salaried guy looking to buy the Karoq, not the rich businessman looking to buy another Rolls Royce.
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Old 15th September 2020, 07:27   #3
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Default re: Toyota halts India expansion, blames ‘We Don’t Want You’ taxes

Our corporate taxation policies are absurd. I was analysing ITC as a company who derives ~45% of it's revenue from tobacco sale. They claimed the govt loses somewhere around 30,000 crores due to smuggled cigarettes.

ITC has been losing revenue due to this and therefore the amounts contributed in taxes has been declining. So the govt does the most obvious, increases NCCD from some 200% to 400% (I think). But in essence, it simply doubles taxation on legitimate businesses.

But, the govt does absolutely nothing to plug the loopholes of smuggled tobacco and tobacco products!

As Abraham Maslow said in 1966, "I suppose it is tempting, if the only tool you have is a hammer, to treat everything as if it were a nail."

The auto industry is heavily taxed and I remember reading somewhere on the percentage of taxes paid towards every automobile. It is no surprise that investors are going to standup to these hostile practices.

Last edited by moralfibre : 15th September 2020 at 07:28.
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Old 15th September 2020, 07:44   #4
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Default re: Toyota halts India expansion, blames ‘We Don’t Want You’ taxes

It is a fact that the auto sector has been a victim of random and illogical policy changes. The 4m and 1200cc rule is a classic example of an arbitrary requirement not found anywhere else. The rules, however, are the same for everyone. If they are good enough for Hyundai or Mercedes or BMW or Kia or Skoda or VW or even the Chinese to launch their latest products in India, what’s stopping Toyota?

This statement is a bit rich, coming from an officer of a company which is the brand ambassador of complacency in India. Toyota India makes its living off selling extremely overpriced UVs that are mostly bought on blind trust. Toyota hasn’t been a victim of our herd mentality approach of buying cars, which has been the undoing of so many manufacturers. It has prospered and profited off it.

Theirs is a simple case of not launching new products because they know they won’t sell at the price points they want. They are so used to a certain kind of margin that they have lost touch with reality and what the competition is doing. We agree that the sub 10 or sub 12L segment is extremely cost competitive, full of de-specced, India-specific products. But that’s not the case higher up. What’s stopping them from launching a genuine contender in the 18-25L segment? The regulation quoted by the gentleman is not applicable here. It is just their insistence on excepting the said product to sell at 30L, which even they know is not going to happen.

Toyota must realise that the Innova’s response was a once in a generation aberration. They must get out of their monopoly mindset and align their products and price points with market expectations. Else, they will become irrelevant.

Last edited by Aditya : 16th September 2020 at 19:21. Reason: Typos, grammar
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Old 15th September 2020, 08:05   #5
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Default re: Toyota halts India expansion, blames ‘We Don’t Want You’ taxes

Isn't this expected? I was wondering why these foreign investors never really spoke up until recently ( even VW said the same only very recently)

I'm sorry but there's no point of complaining about anything because the majority of this country wants freebies but not favorable conditions to create more businesses so that they can earn enough to pay for their needs/ wants. We earned it!

Unless people's requirements change, I doubt India will ever become a better place in our lifetime. Politicians will only dance to the tune of the voters to get/stay elected. They don't think beyond the next state/central elections.

Which means they have to find funds to pay for these freebies! Where do they get this from? By taxing the rich, I mean middle class who have no voice! So these excessive taxes are completely expected but totally kills all sentiment for investors and consumers.

We can only blame ourselves.

Sorry for the rant!

Last edited by Turbohead : 15th September 2020 at 08:14.
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Old 15th September 2020, 08:15   #6
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Default re: Toyota halts India expansion, blames ‘We Don’t Want You’ taxes

I would not like to elaborate, but in short, we are trying to promote State Owned Capitalism, then want to achieve Socialism out of it and all this by adhering to the Fiscal Responsibility and Budget Management Act.

The result is summed up by Toyota.
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Old 15th September 2020, 08:30   #7
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Default re: Toyota halts India expansion, blames ‘We Don’t Want You’ taxes

Coming from the top echelons of a reputable company that is well known for reliability of it’s products in India should be taken seriously. Taxation policies regarding the auto sector were always a bone of contention ever since GST came into being. It is well known that the slump in the auto segment started right after GST came into effect.

That the GST council had to reduce the rates somewhat eased things a bit, but the cess component along with the constant 28% bracket of GST would still make 50% tax component for the higher end cars. It is absurd to tax a Mercedes Benz and a Hero Honda bike at the same GST rate. The four meter rule helped create a completely new segment of cars even though such a rule hardly exists anywhere.

Recently, as we have all seen, the auto sector went through the worst slump. I have heard the finance minister to consider reducing the GST rates on bikes and cars to generate demand and what not, but then similar things were said in August 2019 as well. Recently, the minister also said that Bikes and sin goods cannot be taxed at the same rates. Well, we will see what that results in finally in the days to come.

Prohibitive taxation is a reality and that is why some popular models of many companies don’t ever make it here in India. I remember attending a Ford meet when Nigel Wark was ED-Marketing, and asked him directly why Fiesta hatch is not in India and his one point answer can be taken as taxation and that was in 2011 !!

Of course rules are same for everybody but to discourage new products which are on sale in other parts of the world but not in India because of absurd tax policies needs to be looked at more holistically.

Last edited by ABHI_1512 : 15th September 2020 at 08:35.
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Old 15th September 2020, 08:42   #8
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Default re: Toyota halts India expansion, blames ‘We Don’t Want You’ taxes

Pretty sad coming from a company that's usually not vocal.

When the sub 4m regulations came about I naively thought these would be our kei car equivalent. The 4m restriction looked okay for our crowded roads and while the rules seemed tailor made for Maruti, Tata showed us how to bend the norms to their advantage. Introducing the sub4m compact sedan, downsizing their petrol engines, eventhough ineffective they did try to downsize and turbocharge the petrol engine.

But then around the late 2000s, another set of tax changes overnight put the SX4 and Corolla into the SUV tax bracket.
Based on their ground clearance!!!
While Mahindra did circumvent the ground clearance issue, it was absurd the government was taxing ground clearance. I mean automakers have no interest in jacking up the cars GC, it is our poor roads that do.
Most international crossovers have less GC than most of our hatchbacks, sedans.

Don't know much about economies, but Toyota seems to be bothered by two factors.

Taxation on full hybrid cars - The sticker jobs on Marutis and Mahindras may have convinced the babus that hybrids are a con job and the real beneficiary should be EVs only going by the dainty European norms.
Maybe the CAFE norms will change that, but for now when a sub 4m model has less ARAI mileage figure than a fully taxed hybrid model, something must be changed. I know it's a non enthusiast move, but the current taxation is absurd.

Policy flip-flopping - For a company thats elephant slow and plans in terms of decades, our policies are a nightmare. Not aware of other nations, but when auto companies look forward to an annual budget for any change in automotive polices, that's a bad sign.
Ofcourse there must be change, but overall there should be a long term vision for the auto industry.
Sadly if our oil bills keep piling up, cars will always be a luxury item and cash cow in the government's eyes.

It could be argued that Hyundai-Kia have been aggressive and laser sharp in decisions, regardless of government policies. Part of it is their decision making style, part of it due to the fact that they were aggressive from day one, treating India as a market where they wouldn't have to deal with brand baggage.

Though frankly surprised a senior official going public regarding this, I thought they were biding their time for the mass market to go upmarket or either upcoming CAFE norms or taxation norms to introduce hybrids in the mass market.
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Old 15th September 2020, 08:53   #9
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Default re: Toyota halts India expansion, blames ‘We Don’t Want You’ taxes

So they will make more Toyota badges and slap on them Maruti! Can't really blame them, can we?

Have said this before! I cannot believe the stupid small car rule has been in effect for so long. That rule single-handedly created a truck load of ugly and impractical cars, mediocre engines, blocked new generation of cars just because they were a few millimetres longer and prevented our country from becoming the global auto manufacturing hub. Why would any country with a matured auto market import these contraptions from here??

The powers that be simply gave into the lobbying and drove out a lot of global cars, brands and suppliers from setting shop in our country. If congestion was the real target, they should have gone after width - like in other developed countries. A few centimetres in length or cubic capacity never made a big difference, really!

That pea-brained rule is the BIGGEST example of myopia which took the wind out of the auto industry here. Add the tax loot, and it is no longer viable for many manufacturers! There was such a promise when the auto revolution began, but the fact is that we totally failed in its execution.
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Old 15th September 2020, 09:00   #10
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Default re: Toyota halts India expansion, blames ‘We Don’t Want You’ taxes

Policy flip flops and high taxes on personal vehicles are basically due to the perception that cars are a rich man's toy. This is a hang-over from the socialist era. If India wants to be a manufacturing success story we have to streamline taxes and policies. Unfortunately in a country with more political hues than colours of a rainbow it is asking for too much. And I am not entirely convinced by this atma nirbharta bit i.e. self reliance. It sometimes feels like a regressive step back into the socialist past.

Last edited by R2D2 : 15th September 2020 at 09:08.
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Old 15th September 2020, 09:11   #11
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Default re: Toyota halts India expansion, blames ‘We Don’t Want You’ taxes

There are, in my opinion, more than one side to this matter. First, inconsistent tax policies and practices has been a sad characteristic of the Indian economy since the late 1990s when the need to start developing tax policies and practices that were at least somewhat in line with the developed world started being felt. The need for consistency and predictability is not understood either by the political class (of all political colours) or by the bureaucrats in general - mind you there are exceptions but they prove the rule. This inconsistency arises out of many factors three of which, in my limited experience, are - Ignorance e.g. Finance Minister in c.2009-2012; or Arrogance & I'll show you who is the boss attitude e.g. retrospective rules going back to 1962 being issued in c.2011/2012; or political compulsions arising out of the many priorities that need to be juggled which we as mainly private sector citizens simply do not appreciate.

India's steady GDP growth in the 6% to 8% per annum from 1999 to 2018 numbed the politicians and bureaucrats that this was a given and fiddling with policy levers and rules will not upset the apple cart. That assumption has been tossed out for good now.

So Toyota stating that tax policies are inconsistent is a fair statement. Saying that, that is the reason they won't invest is on less firm ground IMHO as Toyota must be dealing with similar situations in at least a dozen other large markets. But the decision to invest is theirs. They have taken a decision based on probably the stagnant market + likelihood that GDP growth here will take 2 or 3 or more years to come about in a meaningful way + their limited product mix in India. But having taken that decision they figured this is an occasion to give a message on unpredictable tax policies. No harm in that either. I would caution members not to assume that everything a private sector company says is the unvarnished holy grail and the Govt is always wrong. I say that as a dyed in wool capitalist. Recall the incentives controversy Nissan had with the Tamil Nadu Govt where most of us cursed the TN Govt only for it to emerge that Nissan had not fulfilled its own commitments needed to earn those tax incentives.

Policy is one matter. Practice is another. In the erstwhile Service Tax* and in Income Tax the approach of the tax authorities is to question each and every major point to extract more tax and use their punitive powers to force large companies to deposit a part of the disputed figure and then appeal. They do this only with medium and large companies. This I have witnessed personally ad nauseum for at least 18 to 20 years. The aim being to collect as much into the treasury and meet their quite severe & unrealistic targets. If you are a small business the harassment is less. Toyota I believe are really referring to these practices too and not just policies.

Making public statements of this kind is typical of an MNC. It doesn't help either them or in moving the needle. You have to talk and engage with the Govt in a balanced manner and do so consistently. And that brings change. And no you don't have to bribe to bring policy improvements. There are enough in the Govt that genuinely wish to do the right thing. Yelping in the press is the worst way to do this.

*Not covering GST here as it is too new and the full depth of issues is still only emerging.

Last edited by V.Narayan : 15th September 2020 at 09:37.
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Old 15th September 2020, 09:16   #12
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Default re: Toyota halts India expansion, blames ‘We Don’t Want You’ taxes

Many thoughts here, I will try to jot some of them down.

- This is not just a problem for Toyota. It is across the auto industry. Input costs, such as labor costs have gone up on the back of powerful labor groups. But these companies get no respite in anyway. Follow stringent regulations, pay higher electricity rates, high GST, high excise duty; and they have to fall in line of politicians & babus.. or else.. the stick.

- A nation of 1.3 Billion people has let go companies like Chevy, Fiat, etc. Harley is looking for an exit route. Ford too, with M&M partnership. Just shows we do not value investors and job creators. We have not been able to expand the market at a rate that these companies thought we would.

- Sadly, high taxation is not just one auto industry problem. It is cross industry. Toys to toiletries, sanitary napkins to sodas, reading glasses to reel watching in theaters, everything is taxed highly. Why? Oh.. we are a poor country, so car is a sin good. Watching a movie is a sin good. Our politicians have become modern day Gods, defining what is sinful and what is not.

- Our governments are grossly inefficient. Both state and central. I am not talking of corruption here. Just inefficient. Why? Because it does not matter. If governments run out of money.. just raise taxes. Who would stop them. Rs 10 and Rs 13 hike on petrol and diesel excise duties on a single day is just one example.

Governments have only one source of income. Taxes. But no country has ever progressed by taxing its citizens beyond their means to pay.
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Old 15th September 2020, 09:30   #13
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Default re: Toyota halts India expansion, blames ‘We Don’t Want You’ taxes

I don't have the experience or exposure to running a business in India so I'm not qualified to talk about the Govt. policies. But just a different perspective: are we reading too much into this. We do see the increased collaboration between Maruti Suzuki and Toyota in India, and an increasing Toyota branding on Suzuki's cars. Then, Toyota itself has a fairly weird strategy in India: two of their cars are among the best in their segments (Innova and Fortuner) while ridiculously priced, but the rest of their portfolio is rather disappointing.

Has Toyota really shown that commitment to even try to go full throttle in India? They have one of the widest and comprehensive portfolios in the world, have a very good brand following in India and yet, they have a minuscule presence in India. Same with Honda.

Ford, GM, Fiat are suffering globally because of their own strategies so their fate in India hasn't been driven by Govt. policies.

Yes, the ease of doing business in India is suspect but surely that isn't where the buck stops?
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Old 15th September 2020, 10:11   #14
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Default re: Toyota halts India expansion, blames ‘We Don’t Want You’ taxes

I think Toyota is just getting grumpy and complaining.

They have successfully ridden the monopoly wave with their Innova, and to some extent, the Fortuner and the Etios, and have fleeced customers by just jacking up prices every year.

Their products have always been overpriced for what they offer; agree that their quality was top notch until 2012 and that is why Toyotas still make good purchases pre-owned rather than new.

Now, faced with competition, they feel their game is up and hence want to just complain.

The manufacturers that have played their game very well in India are Honda, Hyundai and of late Maruti Suzuki.

They introduced the right products with the right engine capacities with the right technology and gizmos to be relevant to the Indian market.

Even Toyota has had to follow suit and make a departure from their USP viz.plane jade designs and long term reliability. It is a known story of how Crystas are vs Innova w.r.t perceived quality.

Now, here are some examples of weird policies:

1.The sub 4.0m rule is absolute humbug. Except the Indigo CS and the TUV300, all other sub 4.0m cars are a compromise.

A 1.0L turbo petrol with terrific damage potential enjoys low taxation while a relatively harmless practical Innova with a 2.5L doesn't.

Is it still 4m once one installs crash guards in the front and the rear? And where is the safety when extra seats are installed?

A few mm extra length and a lesser powerful engine would make a better combo and deserves a better deal

2. The Liability Only part of insurance for cars >=1.5L has always been typically three times that of cars 1.0 to 1.5L. Why?

The potential of a car to be claim prone and a third party damage creator should be based on data, and some other sensible parameters like bhp/ton.

Example : A Grand Vitara with a poor underpowered 2.0L engine has far lower accident history than, say, a Swift.

Similarly , I understand that few years ago, the Nissan Maximaa used to command the highest premium in the UAE because of its high power to weight. Correct me if I am wrong.

3. Road tax in GJ is 6% whether one buys a scooter or a 30L car. The tax rates in most other states with a high population of well paid executives is atrocious.

4. Every smart businessman registers a car in the company's name to claim tax benefits in depreciation. This is no small amount.

However, salaried people get nothing worthwhile, other than tax benefits under lease plans where they have to fudge bills to get tax benefits under inflated fuel & maintenance and driver salaries reimbursements.

Those with own vehicles get a paltry 28800( for engines >1.6L) and 21600 (for engines <1.6L) a year as amount deductible from taxable income.

Last edited by vigsom : 15th September 2020 at 10:15. Reason: addition
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Old 15th September 2020, 10:12   #15
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Default re: Toyota halts India expansion, blames ‘We Don’t Want You’ taxes

Toyota was raking in the moolah with the overpriced Innova Crysta and the Fortuner. Less said about the Land Cruiser the better.

All of a sudden comes along Mahindra with its Marazzo and the Kia with the Carnival. Kia is threatening to launch more global models. This must have worried Toyota. They had to report back with to head quarters with a reason. Made the policies the scapegoat. The same which they hadn't bothered them for the past 15-20 years.

Having said the above, we do have some absurd laws/ policies. But in our country where polictical correctness is in order and any government which is seen doing something that could benefit the tax paying cash cows are deemed to be the pro-rich this might not change till the time some big name (in the Indian context) packs up their bags.

Wonder instead of ranting on social media if these big manufacturers make a blue print/ plan of action on how changes in policy could enhance profits for the companies, tax revenue for the govt and world class global products for the consumers, presented to the PM/ relevant ministries will make a difference?

Do I sound like a conspiracy theorist/ eternal optimist rolled into one?
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