Tuesday was a day of high drama for Toyota Kirloskar Motor (TKM), the local unit of Japanese automaker Toyota Motor Corporation. First, a senior executive complained about “punitive taxes” and said the company was putting its expansion plans for the country on hold; late in the evening Toyota’s India partner Vikram Kirloskar tweeted that the company would invest ₹2,000 crore in India, in what is believed to be a damage control exercise. Kirloskar’s tweet was in response to Union minister Prakash Javadekar’s tweet which refuted the executive’s comment.

In the morning on Tuesday, TKM vice chairman Shekar Viswanathan said in an interview to a news agency that the company won’t be focussing on further expansion in the country, adding that “punitive taxes” are making life difficult for Toyota in India, the fourth-largest car market in the world. “The message we are getting, after we have come here and invested money, is that we don’t want you,” he said in the interview. He added that the government keeps taxes on cars and motorbikes so high that companies find it tough to build scale. “The high levies also put owning a car out of reach of many consumers, meaning factories are idled and jobs aren’t created.”

Toyota—the fourth largest carmaker in India after Maruti Suzuki India, Hyundai Motor India, and Mahindra & Mahindra which its operations in the country in 1997—however said in a statement that it was “committed to the Indian market and our operations in the country are 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 ecosystem and develop strong capable human resources. Our first step is to ensure full capacity utilisation of what we have created, and this will take time,” the statement added.

Later in the evening on Tuesday, Javadekar, in a tweet, refuted the report that Toyota was putting its India expansion plans on hold because of high taxes. “The news that Toyota will stop investing in India is incorrect. @vikramkirloskar has clarified that Toyota will invest more than ₹2,000 crore in next 12 months,” Javadekar, the minister of heavy industries, tweeted.

Endorsing the minister’s tweet, Kirloskar replied: “Absolutely! We are investing ₹2,000-plus crore in electric components and technology for the domestic customer and export. We are committed to the future of India and will continue to put all effort in society, environment, skilling, and technology.”

Kirloskar, also a TKM vice chairman, added: “We are seeing the demand increase and the market recover slowly. The future of sustainable mobility is strong here in India and Toyota is proud to be part of this journey. We are investing ₹2,000-plus crore towards the electrification of vehicles and helping build a strong India!”

India is considered a difficult auto market with the top two companies bagging more than 70% market share. Auto experts believe that several factors, including Toyota’s unimpressive portfolio, is the reason why the company could not gain more than 5% market share in over two decades of operations. For example, the Toyota Corolla—which is the world’s highest-selling compact sedan—did not do well in the Indian market and has already been discontinued. According to data from the Federation of Automobile Dealers Association, the company’s market share in August 2020 has fallen to 2.6% from 5% in August 2019.

“Passenger car manufacturers have been going through a terrible situation for the past two years and have felt the need for lower tax to gain more market traction. The expectation is reduction in tax could increase demand and in the absence of incremental demand one would want to reassess their strategies and plans,” said Sridhar V., partner, Grant Thornton India.

Shekar Viswanathan

High drama over Toyota’s ‘tax pain’