In a significant development that is bound to shake up the auto industry in India, the Uttar Pradesh state government has decided not to reverse its recent policy of waiving registration taxes for hybrid cars, as per a report by Reuters.
This decision by India’s most populous state, which Reuters says was confirmed by two sources, marks a significant victory for Toyota while simultaneously dealing a setback to domestic automakers like Tata Motors and Mahindra & Mahindra.
Toyota, a major player in the hybrid car market, is poised to gain significantly from this decision. The tax waiver makes hybrid vehicles, like the Toyota Camry hybrid sedan, up to 10 percent cheaper in the state, potentially saving consumers up to Rs 432,000. This substantial cost reduction could lead to a surge in Toyota sales in Uttar Pradesh, which accounts for about 10 percent of India’s car market.
The decision was confirmed during a meeting on Sunday between UP’s Chief Secretary Manoj Kumar Singh and various automaker representatives. According to sources familiar with the matter, Singh clarified that the state’s policy would remain unchanged despite lobbying efforts by significant automakers like Hyundai, Kia, Tata Motors, and Mahindra & Mahindra.
These companies had argued that the tax waiver on hybrids could undermine India’s push towards fully electric vehicles (EVs) and disrupt their investment plans to boost EV production.
EV producers are concerned that other states may follow Uttar Pradesh’s lead and offer similar incentives for hybrid cars. Such a trend could pose challenges for India’s ambitious targets for EV adoption.
Currently, EVs in India are subject to a federal tax of 5 percent, while hybrid cars are taxed at 43 percent, which is slightly lower than the 48 percent tax rate for gasoline-powered vehicles. The addition of state road and registration taxes, which local governments determine, further complicates the pricing dynamics in the automotive market.
The UP government’s decision to maintain the tax waiver will likely create ripples across the Indian auto industry. It highlights the ongoing debate between promoting hybrid technology as a transitional solution and pushing for a more rapid shift towards fully electric vehicles.
While Toyota and other proponents of hybrid vehicles are celebrating this policy as a victory, EV manufacturers are left grappling with the potential implications for their long-term strategies in India.
The broader impact of UP’s decision remains to be seen, particularly whether it will influence other states to adopt similar policies, potentially altering the country’s competitive landscape for hybrid and electric vehicles.
