Tata Motors urges govt to keep hybrid tax, Toyota lobbies for cut


Tata Motors has opposed Toyota’s appeal for tax reduction on hybrid cars, claiming that they are more polluting than electric vehicles and should not

Tata Motors has opposed Toyota’s appeal for tax reduction on hybrid cars, claiming that they are more polluting than electric vehicles and should not be given a tax advantage.

Hybrid cars have been touted as the bridge to fill in the gap between internal combustion engine technology and electric propulsion tech. Several automakers like Toyota, who have been selling hybrid cars in India have been lobbying for a tax cut on the hybrid vehicles in India. However, Tata Motors, which is present in both the ICE and EV segments, has urged the government not to cut taxes on hybrid cars, reported Reuters.

The report has cited sources saying that the homegrown automaker claimed that the tax on hybrid cars should not be cut as they are more polluting than pure electric vehicles. This countered the appeal from Toyota for lowering the tax on hybrid cars.

Currently, hybrid cars in India that use a petrol engine and an electric motor combined with an electric battery pack are slapped with as high as a 43 per cent tax, while pure petrol cars see a 48 per cent tax. On the other hand, electric cars are taxed at a five per cent rate under the GST regime. Hybrid cars see higher tax incidence in India compared to their pure petrol counterparts, despite emitting lower pollutants into the environment. This has been a point of debate in the auto industry, as many appealed to the government to lower the tax rate for hybrid cars considering they are less polluting than the pure petrol models.

Toyota appealed for a tax cut on hybrid cars

Toyota, which is a major global player in the hybrid car segment and popularised hybrid cars in India with the Prius, has been urging the Indian government to cut taxes on hybrid vehicles. The Japanese automaker has been claiming that hybrid cars reduce carbon emissions compared to petrol ones. Considering this appeal, India’s trade promotion and industry ministry has urged the heavy industries ministry to rationalise cess on hybrid cars in December 2023, which irked Tata Motors.

Over the last few years, hybrid cars have registered record demand across India owing to their less polluting nature compared to pure petrol or diesel cars. This propelled several automakers in both the mass-market and luxury segment to launch hybrid cars. Currently, automakers such as Maruti Suzuki, Toyota, and Honda among others sell hybrid cars in the country.

Tata opposes Toyota’s appeal

Tata Motors has reportedly met government officials and written to the trade promotion and industry ministry, saying that the country faces an urban air quality crisis with health implications, and hybrids should not be incentivised. “Any further incentivisation of hybrids will be a detriment to the climate goals and nation’s economy,” Tata reportedly wrote in a confidential letter to the ministry.

This seems lobbying by Tata Motors to protect its interest in the country’s electric car market, where it dominates with about 85 per cent market share. The automaker reportedly said that it believes electric vehicles are the only practical solution to fight India’s urban air pollution, as well as reducing oil imports.

Interestingly, Tata is also pushing back against Tesla’s attempt to secure lower taxes for imported electric vehicles. Also, Tata Motors is not the only automaker that opposed the reduction of taxes on hybrid cars. Two other major car manufacturers present in the Indian market, Hyundai and Mahindra too opposed any such move as they are in favour of continuing with the current policy.

First Published Date: 18 Jan 2024, 10:01 AM IST

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