Toyota on Tuesday announced that it is halting its expansion plans in India. The company feels that India’s high tax structure is forcing it to halt expansion and lie low.
Toyota said the message that it got from India’s high tax structure is that “we don’t want you.”
How is Toyota faring now?
Riding on just three models, Korean car brand, Kia Motors, sold nearly two times more than Toyota in August. The Japanese company has an eight model line-up in India.
Having entered India only in the mid-2019, Kia has already grabbed a 5 percent share of India’s passenger vehicle (PV) market as at the end of August. In comparison, Toyota, having entered India 23 years ago, has a PV share of just 2.57 percent.
Kia boosts investments in India
Buoyed by the response, Kia has lined up investments to the tune of Rs 400 crore in Andhra Pradesh. This is in addition to the Rs 8,150 crore it has already invested. New investments also include funds for areas like electric vehicles.
Other global brands such as PSA Peugeot Citroen, Hyundai, Fiat Chrysler, MG Motor, Volkswagen and Renault have also committed investments into India for capacity creation and for product development. This is despite the disruption caused by the COVID-19 pandemic.
India is the world’s fifth largest PV market and was set to grow more than three times to 10 million units by 2030 from 2.77 million units, if it were not for the COVID-19 disruption, as per estimates made by Suzuki Motor Corporation, which controls half of the PV market.
Toyota issues clarification later
Toyota issued a clarification a few hours ago. “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 utilisation of what we have created and this will take time,” the company said.
“In the 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 the industry and employment. We recognise 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,” added the company.
Suzuki tie-up
The message comes at a time when Toyota is getting ready to launch a compact sports utility vehicle (SUV) on September 24, which would be the second vehicle it has borrowed from Suzuki Motor Corporation to be sold under its own brand.
The Toyota Urban Cruiser will be a masked version of the Brezza, the highest-selling SUV for Maruti Suzuki. A year ago, Toyota introduced the Glanza premium hatchback, which is a rebadged Maruti Suzuki Baleno. Both are a result of an agreement between the two Japanese companies to help each other in areas of product development and new technologies.
Experts tracking the industry feel that by borrowing products from a rival, Toyota was forced to create a stop-gap solution for the Indian market in the hope to avoid further erosion of their market share.
“Toyota has always underestimated the Indian car market potential. Inspite of their presence in India for the last two decades, they have stuck mainly to upper segment vehicles. Toyota never came up with competitive cars like what the competition has been offering to the Indian consumers in mass segments,” Puneet Gupta, associate director, IHS Markit, said.
Failed products
Toyota did develop cars from scratch for the Indian market with the help of engineers who travelled from Japan to study the Indian car consumer. The result was the Etios (sedan) and the Etios Liva (hatchback).
While the Etios, positioned just below the Honda City, did make some inroads in the commercial segment (taxi), the Liva failed to challenge the market leader Maruti Suzuki Swift. With the switchover to BS-VI emission norms, both models have been phased out from its portfolio.
Toyota also launched the Yaris sedan to take on the segment leader Maruti Suzuki Ciaz and Honda City. But the launch coincided with a meltdown in demand for such sedans with the emergence of the SUVs. SUVs like Kia Seltos and Hyundai Creta are priced in the same band (Rs 10 lakh-13 lakh) as the Yaris.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
