Why Toyota's expansion stop is terrible news in the worst time
The number of fresh cases of COVID-19 is increasing at a breakneck speed in India. The economy has already slumped into the depth of the Indian Ocean. Open Twitter on your mobile and you will see at least one trend related to 'bad news'. Unemployment, farmer suicide has soared such heights that the government decided not to keep a track of those! The manufacturing sector is crushed by 40% in this quarter.
In this perilous condition, Toyota Motor Corp. has released a statement that they are NOT going to expand in India. Why they are doing this? The decision behind this fatal news is 'we don't want you' taxes levied upon by the government.
This was coming all the way. Any sane businessman would have done the same.
In India, if a car manufacturer decides to manufacture SUVs of capacity more than 1500cc, the buyer needs to pay 50% tax. That's half of the price of the car itself! This is the reason, Toyota manager has asserted "The message we are getting after we have come here and invested money, is that we don't want you".
So what does this mean in this time of extraterrestrial crisis?
More potential-job is lost indefinitely. The expansion means more investment, which in turn means 'fresh employment opportunities'. As Toyota is 'pausing' their investment, no remedy for that 45-year high unemployment rate.
When PM Narendra Modi has given more importance to 'Make in India', this announcement put a serious implication on that campaign. China is full throttle with the US in an unofficial trade war. While the US side is on the haste to ban an array of Chinese companies, China is busy limiting US aircraft. Companies are trying to get away from this uncertainty (read China). While the Indian government is trying to grab this opportunity, it's terrible tax structure, a hefty amount of red-tapes, abysmal bureaucracy are the things that pushing away this cluster of potential investments. Similarly, potential government tax is also zeroed by this decision.
This is the same reason the premier car manufacturer from the US, Elon Musk owned Tesla didn't even consider this country. They set up their new plant in China, snubbing India.
Toyota actually owns a finger-nail share of the Indian four-wheeler market. An 'insignificant' 2.6%. But in monetary value it is huge. The SUV market is considered to be the 'premium' market, considering the starting price is at 18-20 lakh, going to 40 lakh for the top model.
This will put the government in a jeopardy. All ready the debt-to-GDP ratio has risen to 72.2% from 67.4%, which is expected to rally up to a nightmarish 87%. The government is in no stance to reduce the tax rated on these "luxurious" equipment.
This is a situation of urgency. In this darkest night, when the Indians are under the grasp of a highly-contagious virus, China is trembling the Indo-Chin borders, a dark shadow of 'bankruptcy' is looming over the Indian Economy. If this is taken lightly, it will kick our economy 20 years back in time.
Toyota is only the start.