Toyota Kirloskar Motor says will invest Rs 2,000 crore in India in current fiscal

A top executive at Toyota’s Indian arm Tuesday stepped in to control the damage potentially caused by a
colleague’s remarks that high taxes were preventing the Japanese automaker from committing more funds to India, saying that the company would invest Rs 2,000 crore in the country in the current fiscal year itself.

Toyota Kirloskar Motor (TKM) Vice Chairman Vikram Kirloskar told ET, “First of all, let me say, we feel quite welcome in India. Taxation (on vehicles) is high, but that is true for everyone. We have been asking for a reduction for many years. But I do not think it will happen given the crisis."


The production levy (GST) rate on automobiles currently stands at 28%, topped with a cess ranging from 1-to-15%. The Society of Indian Automobile Manufacturers (SIAM) has been urging the government to temporarily reduce the GST rate across all categories of vehicles to 18% to spur demand.

Kirloskar’s comments came after TKM’s whole-time director and colleague Shekar Viswanathan was quoted by Bloomberg as saying that “the message (from punitive taxation) 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.”

Kirloskar, however, clarified that Toyota has not stalled any investments in India.

“We are committed to the Indian market. We are not increasing capacity because we have capacity. This year, we will be investing more than Rs 2,000 crore on technology and electrification, both for the domestic and the exports market,” he said. The investment will be made by Toyota Kirloskar Motor (TKM), along with Toyota Kirloskar Auto Parts (TKAP) and Toyota Industries Engine India (TIEI).

Kirloskar said Toyota is working closely with Suzuki across verticals, be it production, technology or procurement, to expand its presence in the Indian market.

“We are working closely with Maruti Suzuki. They have a lot of skills to make cars at a competitive cost. You will see a lot of things coming in the next 2-3 years, both for the domestic market as well as for exports.”

Meanwhile, Viswanathan told ET that while the arrangement with Suzuki to introduce cross-badged models in the Indian market will continue, the company will not bring in new vehicles from its own portfolio into the country in the near future.

Viswanathan said the high tax structure, particularly on hybrid vehicles, does not justify local manufacturing. “Hybrids are the mainstay of our portfolio. And at 43%, even if people buy, volumes will be very less. We cannot manufacture them locally, we will have to import them. Hybrid vehicle taxation should be taken to the pre GST level of 28% and a further reduction to 18% in line with EVs which are taxed at 5%,”

Viswanathan said. “A hybrid vehicle functions as an EV but has no need for expensive charging infrastructure. Its energy source for the battery is gasoline whereas for EVs, it is electricity drawn from the grid,” Viswanathan said. Even for petrol vehicles, he said, the GST rate should be brought down to 18% from the current 28%.

“Such punitive taxes discourage foreign investment, erode automakers’ margins and make the cost of launching new products “prohibitive," Viswanathan was quoted as saying by Bloomberg. “You’d think the auto sector is making drugs or liquor."

Viswanathan said Toyota would not exit the Indian market, but at current level of sales, it would not need to invest in setting up a new plant. “We will not exit India. We can only invest in a new plant when we utilise the current capacity. At this level of taxation, we don’t see that happening soon”, he said.

Toyota has an installed capacity to produce 310,000 units across its facilities in Bidadi, Karnataka. The company sold 114,081 vehicles in the last financial year. Toyota additionally has an arrangement with Suzuki for sourcing vehicles for sale in the Indian market. As part of the agreement, Maruti Suzuki supplies premium hatchback Baleno to Toyota Kirloskar, which is sold as Toyota Glanza. Maruti Suzuki will shortly start supplying Vitara Brezza to Toyota, which will be sold as Urban Cruiser in the Indian market this festive season.

In a statement, the company said, “Toyota Kirloskar Motor would like to state that we continue to be committed to the Indian market and our operations in the country is 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 eco-system and develop strong capable human resources. Our first step is to ensure full capacity utilization of what we have created and this will take time.”

The statement added that in wake of the slowdown that has been exaggerated by the COVID-19 impact, the auto industry has been requesting the government for support to sustain industry through a viable tax structure. “We remain confident that the government will do everything possible to support industry and employment. We recognize the strong proactive efforts being made by the government to support various sectors of the economy and appreciate the fact that it is open to examine this issue despite the current challenging revenue situation”, it said.