Hybrid cars may bear cess load for longer
ministry’s recommendations on the matter. Recently, transport minister Nitin Gadkari had said a proposal to reduce GST on hybrid vehicles to 5% and 12% for flex engines has been sent to the finance ministry, which is considering the request.
The Society of Indian Automobile Manufacturers (Siam), the country’s apex auto industry body, has been unable to take a stand on the matter, with leading members on opposite extremes. Maruti Suzuki Grand Vitara, Toyota Innova Hycross and Honda City are some of the India-made vehicles that come with hybrid variants.
Automakers also worry if EVs will continue to enjoy tax breaks as their market share reaches 5-10%, from the current 2%. In December 2022, Ola Electric founder Bhavish Aggarwal had said EVs will not need such incentives once their market share rises.
“Today, the EV two-wheeler penetration is 4-5%. I think once it is in double digits, the industry shouldn’t need subsidies,” said Aggarwal, co-founder of Ola Electric, which has taken an early lead in the electric scooter space.
Meanwhile, hybrid sales overshadowed electric cars in India in 2023 as more customers worry over EVs’ range, Mint reported on 29 February.
Worldwide too, hybrids have extended their lead over EVs, Wall Street Journal reported on 15 April. Mercedes-Benz, BMW, Ford, General Motors and Stellantis have reported robust growth in hybrid sales, driven by factors such as mineral supply chain challenges, inadequate charging infrastructure, and consumer affordability concerns.
“Concerns linger about whether EVs will continue to enjoy tax benefits at higher adoption levels, in terms of raising questions about their long-term viability in the Indian market given the global narrative at present, in which EVs have seen a slow phase of growth even with significant price cuts”, a top executive at a leading automotive firm said, declining to be identified.
Companies such as Maruti Suzuki and Toyota Kirloskar Motors have advocated a “graded” tax policy, where vehicles are taxed in a manner proportionate to their emissions, which would mean technologies like CNG and hybrids attract taxes higher than those levied on EVs, but lower than fuel-burning vehicles.
“Despite EV price reductions, pace of electrification has slowed in the recent quarters. At the same time, strong hybrid sales are picking pace led by recent launches from MSIL and Toyota. Penetration of Strong Hybrid cars at 2.3% surpassed 2% for BEV cars during 4QCY23 owing to affordability issue and lack of adequate charging infra. On the other hand, despite unfavourable taxation, Hybrid cars offer better value with higher mileage and no charging hassle,” a report by brokerage firm JM Financial said, adding that a potential reduction on taxes of hybrid vehicles to 12% can reduce the TCO (total cost of ownership) of a Strong Hybrid Grand Vitara (by Maruti Suzuki) by 13% and bring it at par with a long-range compact electric SUV.