Camry vehicles go through final inspection after rolling off the assembly line at Toyota Motor Corp.’s manufacturing plant. in Georgetown, Kentucky, USA on Thursday, August 29, 2019.
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A move by India’s Uttar Pradesh state to waive some taxes on hybrid cars will make them 10 percent cheaper, giving Japan’s Toyota Motor a major lobbying victory and raising industry and analyst expectations that other states could to follow their example.
Just like with electric cars, the government of India’s most populous state will also waive registration tax on some sales of hybrid cars, it said in a July 5 notification.
Hybrid cars offer fuel savings as they run on both electric motors and internal combustion engines.
Shares of Maruti SuzukiIndia’s leading automaker that makes and sells hybrid cars in partnership with Toyota, have risen 5.5 percent since local media first reported the state’s notice this week.
“This is a significant incentive provided by a state for hybrid cars. Uttar Pradesh’s move could encourage other states to follow suit,” Morgan Stanley said in a note, adding that with more hybrid models to come, the share their in total sales will increase.
Uttar Pradesh accounts for 10% of India’s total car sales.
Toyotawhich has an 85% share of India’s “strong” hybrid car market with its fast-selling Hycross and Hyryder SUVs, “is likely to be a key beneficiary of this move, followed by Maruti Suzuki,” Nomura said in a note.
Toyota and Maruti Suzuki did not respond to queries from Reuters.
Exemptions from state levies apply to so-called strong hybrids, which can run on electric motors for a short time, and to plug-in hybrids.
Hybrid hybrid models made up less than 3 percent, or about 28,000 units, of India’s total car sales of 1 million in January-March this year, while electric cars accounted for nearly 4 percent, according to Nomura.
Indian Prime Minister Narendra Modi’s government has focused green mobility on electric vehicles, offering companies millions of dollars in incentives to build such cars, while making no concessions on hybrids.
India’s federal sales tax on electric vehicles is just 5%, while the tax on hybrids is as high as 43%, close to the 48% levied on gasoline-powered cars. Registration taxes imposed by a state are separate, adding to the overall cost of the car.
Honda motorwhich sells a potent hybrid variant of its popular City sedan in India, said the decision will “undoubtedly attract a larger set of customers to join the country’s green mobility mission”.
Toyota, the world’s biggest carmaker, has long lobbied the Modi government to cut taxes on hybrids, which it says pollute less than gasoline cars, but has received little political support.
These lobbying efforts have been opposed by domestic players such as Tata Motors and Mahindra & Mahindra who have placed big bets and investments in EVs and do not want the government to change its policy or tax stance.
Hyundai Motor is evaluating plans to launch its first hybrid car in India as early as 2026, and Mahindra said in May that it was “closely considering” hybrid technology.
