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Toyota will stick to hybrids timetable for India

Murali Gopalan | Updated on: Feb 22, 2018
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Vice-Chairman of the company’s Indian arm is hopeful that duty levels will fall

Shekar Viswanathan is no stranger to the unpredictable nature of the Indian automobile industry. As Vice-Chairman and wholetime Director of Toyota Kirloskar Motor, he has had to grapple with the challenge of the 2016 diesel ban in Delhi, which hit sales of the top-selling Innova model.

Beyond this has been the electric vehicle (EV) policy that has now been put on the back burner even while Toyota and Suzuki have announced their intent to launch an EV in 2020. This volte-face has been a bit of a surprise, especially after the high voltage electric theme of the Auto Expo.

Concerns over GST

Additionally, there are concerns on the 43 per cent levy for hybrid cars (28 per cent GST and 15 per cent cess) while EVs attract a far lower 12 per cent. “We have told the Government repeatedly that hybrid is a bridging technology though this has not translated into duty reliefs,” says Viswanathan. “I don’t have a problem with 12 per cent for electric.”

He is quick to add that Toyota does not expect hybrid levies to be at par with electric but ideally at 28 per cent without the cess. “I would surely like 18 or 12 per cent for hybrids too but that is not realistic,” adds Viswanathan. “At the end of the day, if you bring down taxes too dramatically, it will not work.”

As he points out, if everything is brought down to 12 per cent and only electric cars are sold, Government revenues will take a big hit. Of course, nothing of the kind will happen immediately considering that the EV policy has been put on hold. And, as industry experts add, a huge ramp up in EV numbers is unlikely to happen for the next 10 to 15 years at last.

Viswanathan understands the Government’s compulsions for desiring to go the electric route, especially with crude oil prices on the rise (now at $70/barrel) that puts a big strain on the import bill. The second worry is pollution where the reaction from policymakers has been knee-jerk in striving to reduce use of petrol and diesel while choosing to go fully electric.

Even while there is no EV policy to worry about for now, with bigger concerns on the more important BS-VI deadline in 2020 taking centrestage, the 43 per cent levy on hybrids remains. Sections of the auto industry are, however, confident that it will be reduced eventually. Viswanathan reminds you that companies such as Toyota understand the business of hybrids given its massive global exposure in this field coupled with its intent to pursue its clean air vision aggressively in the coming years.

The point made is that these are subjects, which automakers understand well since it is their core area of expertise. Yet, even some of the biggest of them do not really know what the future has in store in terms of electric, hybrid or hydrogen.

“There is no single answer for the transportation sector and the choice of fuel has to be consumer acceptance-driven,” explains Viswanathan. “I may like electric for short distances within the city in my retired life but this may not hold true for my son would prefer longer drives in the weekend,” explains Viswanathan.

Stick to basics

Toyota plans to stick to its core business plan of introducing hybrids irrespective of the duty structure because of its firm belief that the Government will see reason. “We will go ahead because that is our strength and we have sold big numbers globally,” he adds.

Toyota will continue with its hybrid and electric plans, provide technology to Suzuki and continue to “remain a big believer” in the Indian market, which is poised to grow. “It will have hybrids, electric and eventually hydrogen. Why should India be so different from the rest of the world in terms of fuel choices?” asks Viswanathan.

It will also be a big help to the company’s Indian arm if duties on hybrids come down from 43 to a more realistic 28 per cent or so. After all, this will mean that headquarters in Japan will be more favourably disposed to India and ensure that it gets its place in the sun.

“We at Toyota Kirloskar Motor are not in competition with local players but with our arms in Thailand, Indonesia in getting products that headquarters has to offer,” admits its Vice-Chairman. It is fair to assume that the suddenness in which this 15 per cent cess was introduced for hybrids caused the other subsidiaries in the ASEAN region to become more important to the parent, at least at that point in time.

On the backfoot?

“This cess was an opportunity lost,” says Viswanathan and it is likely that India may have just missed the bus in getting a larger share of the product portfolio pie. Long term planning and allocation of resources are impacted with ad hoc decisions, which means India is on the blackfoot even while it has not lost the battle yet in the global map.

“Imagine persuading Toyota for a particular product and other ASEAN countries promise higher volumes because of lower duty levels. Who will get the allocation finally?” he asks. Beyond this, headquarters in Japan also looks at India’s track record in labour relations, market performance, quality levels, customer acceptance, dealer performance and supply chain performance as well as profitability. Hence, delivering more profits on the Fortuner and Innova Crysta means that India will be valued more.

According to Viswanathan, the Suzuki alliance is important to Toyota both in terms of technology as well as a partnership with a small carmaker. The company already has Daihatsu and Mazda as allies for the ASEAN region and the US respectively. Suzuki could translate into something significant for India, which is quickly on its way to becoming the third largest market in the world.

Published on February 22, 2018

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