Tax cuts not best way to revive auto demand: Toyota Kirloskar MD Masakazu Yoshimura

New Delhi: Breaking from industry consensus and taking a line different from his own company executives, Toyota Kirloskar Motor MD Masakazu Yoshimura told ET that rather than lowering taxes, incentivising consumers to scrap older vehicles and buy new ones is the best way to stimulate demand. The Society of Indian Automobile Manufacturers (SIAM) has sought a 10 percentage points cut in GST. The industry estimates that inclusive of all levies, including cess, tax on automobiles ranges from 28% to 50%.

RC Bhargava, chairman of the country’s largest automaker Maruti Suzuki, had also asked for lower taxes as well as total acquisition costs for vehicles. Last week, Bloomberg quoted Toyota Kirloskar Motor director Shekar Viswanathan as saying the company may not expand further in India due to the country’s “high tax” regime.

Taking a different stand, the company’s vice chairman Vikram Kirloskar had told ET that it would invest Rs 2,000 crore in the ongoing fiscal year itself and that “we feel quite welcome in India”. However, Kirloskar too said that taxes on vehicles were high, but added that he wasn’t expecting any cut given the current crisis. Yoshimura told ET that tax cuts are “unsustainable” over time. “Everybody (is) asking for tax reduction... Personally, I think tax reduction is not sustainable because tax (revenue) is used for social welfare. I believe the scrappage policy is a better solution to create consumer demand.” Yoshimura also said a good scrappage policy will take unsafe and polluting vehicles off roads.

On India plans, he said the company has the capacity to produce 310,000 internal combustion engine (ICE) vehicles but that increasing petrol and diesel vehicle capacity beyond that would be misaligned with the government’s aim to cut crude imports and carbon emissions. “We are only producing 1/4th or less than 1/3rd (of 310,000 units). To produce more ICE vehicles (beyond 310,000 units), does it align with national interest? One must be careful. That is why at the same time we have started to invest in electrified components, facilities and tools… already investing Rs 2,000 crore in those,” Yoshimura said.