Camry vehicles go through final inspection after rolling off the assembly line at Toyota Motor Corp.’s factory. in Georgetown, Kentucky, USA, Thursday, August 29, 2019.
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India’s Uttar Pradesh state’s move to scrap some levies on hybrid cars will make them 10% cheaper, giving Japan’s Toyota Motor a big win in lobbying efforts and raising industry and analyst expectations that other countries could follow suit.
As it did with electric cars, the government in India’s most populous country will also waive registration tax on some sales of hybrid cars, it said in a July 5 notification.
Hybrid cars provide fuel economy because they use an electric motor and a combustion engine.
Share from Maruti SuzukiIndia’s top automaker, which produces and sells hybrid cars in partnership with Toyota, rose 5.5% since local media reported the country’s news for the first time this week.
“This is a considerable incentive given by the state for hybrid cars. Uttar Pradesh’s move could encourage other states to follow,” said Morgan Stanley in a note, adding that if more hybrid models are coming, the share of 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 the main beneficiary of this move, followed by Maruti Suzuki,” Nomura said in a note.
Toyota and Maruti Suzuki did not respond to Reuters inquiries.
Exemption from the state levy applies to so-called strong hybrids, which can run on electric motors for some time, and to plug-in hybrids.
Powerful hybrid models made up less than 3%, or about 28,000 units, of India’s total 1 million car sales in January-March this year, while EVs made up nearly 4%, according to Nomura.
Indian Prime Minister Narendra Modi’s government has focused its green mobility push on electric vehicles, offering companies millions of dollars in incentives to build the cars, but making no concessions on hybrids.
India’s federal sales tax on EVs is only 5%, while the levy on hybrids is as high as 43%, close to the 48% levied on gasoline cars. The registration tax imposed by a separate state increases the overall cost of the car.
Honda Motor Districtwhich sells a strong Hybrid variant of its popular City sedan in India, said the decision will “definitely attract a larger set of customers to join the nation’s green mobility mission”.
Toyota, the world’s biggest carmaker, has long lobbied the Modi government to cut taxes on hybrids, which are seen as less polluting than petrol cars but have not won policy support.
These lobbying efforts have been opposed by domestic players like 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 taxation attitude.
Hyundai Motor District is evaluating plans to launch the first hybrid car in India in early 2026, and Mahindra said in May that it is “closely looking at” hybrid technology.
