Lower taxes to spur growth of hybrids?

September 25, 2022
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Despite the high taxation, hybrids are back in the reckoning. The flurry of bookings received by Toyota Hyrdyder and the Maruti Grand Vitara shows the customer confidence for the battery and gasoline engine line up of vehicles that are drawing up customers who don't want the headache of dealing with range anxiety.

Government has also indicated moving to emission-based taxation where vehicles with alternative fuels will be taxed lower than ICE variants.

Of the Rs 10,000 crores allocated under the second phase of the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME-II) scheme, OEMs have picked up Rs 1,400 crores by the way of subsidies so far.

The Centre currently imposes a 5 percent tax rate on EVs, with strong hybrids attracting a 43 percent tax. Cars less than 4 meters like Baleno small hybrids currently attract 29 percent tax 

Industry experts are of the view that high taxation is limiting the full potential hybrid vehicles has to offer as they too are environment friendly and rationalizing taxation in line with global norms can help the industry move towards decarbonization.

According to Vahan data, 4.2 percent of the total sales of 2.7 million passenger vehicles sold last year were hybrid sales, predominantly mild hybrids With affordable strong hybrids coming in, this market will see a strong revival as consumers who are environmentally conscious and want an anxiety-free ride

Toyota's next hybrid for India will be a multi-purpose vehicle, or people-carrier, expected later this year or early in 2023, says a company official. Toyotas  strategy with the low-cost manufacturing of Maruti is to cut the cost of full hybrid by combining the hybrids with a low-cost chassis and some upper body parts from Suzuki and make a niche for themselves in the market.

Other experts are of the view that the entry of strong hybrids will lower the demand for diesel SUVs from the current 51 percent.

Vahan data also reveals that in passenger cars and utility vehicles, petrol accounted for 68 percent of sales, diesel 19 percent, and CNG 8 percent, in fiscal 2022.. With the entry level price of Toyota Hyrdyer. 1.5 petrol strong-hybrid e-CVT from Rs 18.99 lakh and Maruti too to aggressively price is Grand Vitara will draw more consumers from ICE, EVs towards hybrids.

The battle now will shift to hybrid v/s  diesel as the incremental cost is only 15 percent. For a personal petrol vehicle buyer who on average drives 10,000 km annually, the breakeven for a hybrid would only be over 10 years based on current ARAI mileage figures, added another auto expert

"Reduction in battery prices over the next few years will not fully reflect in the price of an HEV like it would reflect in the case of an EV." He further explains. Even if battery prices are coming down, automakers are constantly looking to increase their prices looking to the strong demand. But not all of them are able to buck the trend." he reflected 

Honda too is making its presence felt in the market with its Honda City HeV which too has got a fair number of bookings despite the company increased its price by 39,000 odd rupees. The Honda City Hev now sells at 19.92 lakhs onwards. Honda globally has targeted that hybrids to make up 50 percent of the model's overall sales.

For Suzuki  Hybrid vehicles makeup 24 percent of Suzuki’s sales worldwide, and the company is vying to replicate the success story in India as well 

The Union Budget for FY23 gave a major emphasis on the sector and increased the fund allocation for the FAME scheme over three-fold from Rs 800 crores last year to Rs 3,000 crore in the current year. 

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