By Aditya Kalra and Aditi Shah
NEW DELHI (Reuters) – Hyundai, Kia Motors, Tata and Mahindra are lobbying India’s most populous state not to offer incentives for hybrid cars, saying the move – set to help rivals Toyota and Maruti Suzuki – would hit targets on adopting electric cars and investment plans.
Four separate company letters to Uttar Pradesh, seen by Reuters, highlight the rivalry between automakers in a country where taxation is skewed in favour of EVs.
In a major lobbying win for Toyota, Uttar Pradesh, which alone accounts for 10% of India’s car sales, waived registration taxes on some hybrid cars last month, making them 10% cheaper and resulting in savings of up to $5,200 on a Toyota Camry hybrid sedan, for instance.
Hyundai, Kia, Tata and Mahindra & Mahindra have not publicly commented on Uttar Pradesh’s move, but their letters to the state show they are opposing the tax waivers, citing the impact on India’s goal of ensuring that 30% of new car sales are electric from 2030.
Hyundai, which is gearing up for a $3 billion Indian IPO, said in a July 12 letter that the move would “derail” electrification of transport, while Kia said promoting hybrid vehicles would negatively impact widespread EV adoption.
Mahindra’s letter flagged concerns about disruption to the EV market.
Tata, which raised $1 billion from private equity firm TPG in 2021 for its EV business, said in its July 11 letter that favouring hybrids put at risk the industry’s $9 billion committed for developing EVs. It added this investment was the result of a “clear focus” on the sector by Prime Minister Narendra Modi’s government.
Hyundai declined to comment, while Tata, Mahindra and Kia did not respond to queries. None of these companies sells hybrids in India.
Vijay Kumar, an Uttar Pradesh transport official, told Reuters the state government was reviewing objections received from some companies and that no decision had been taken. An industry meeting will be held on Aug. 11, he said.
Modi’s government imposes a federal tax of just 5% on EVs, while hybrids are taxed at 43% – just below the 48% tax for gasoline cars. Road and registration taxes in states – like the one Uttar Pradesh waived – are extra.
India registered 4.2 million car sales in its 2023-24 financial year, with hybrids and EVs accounting for fewer than 100,000 sales each.
Uttar Pradesh’s tax move has triggered concerns among EV players that other states could follow suit, executives say.
Hybrid proponents, however, say there is not enough charging infrastructure for EVs in India and hybrids – which use both a battery and combustion engine – should be promoted as they are less polluting than fossil fuel-only cars.
In a statement, Maruti said: “If in addition to EVs, hybrids get encouragement, it will bring major incremental gains towards national objectives of oil import reduction and CO2 reduction.” Toyota did not respond to Reuters queries.
(Reporting by Aditya Kalra and Aditi Shah; Additional reporting by Saurabh Sharma in Lucknow; Editing Mark Potter)
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