UP to waive registration tax on hybrid cars, major win for Toyota, major setback for Tata, Mahindra

In a major 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 major victory for Toyota, while simultaneously dealing a setback to domestic automakers like Tata Motors and Mahindra & Mahindra.

Toyota, a key player in the hybrid car market, stands to benefit substantially from this decision. The waiver makes hybrid vehicles, such as the Toyota Camry hybrid sedan, up to 10 per cent cheaper in the state, leading to potential savings of up to Rs 432,000 for consumers. This reduction in cost could significantly boost sales for Toyota in Uttar Pradesh, which accounts for approximately 10 per cent of India’s car market.

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The decision was confirmed during a meeting between UP’s Chief Secretary Manoj Kumar Singh and various automaker representatives on Sunday. According to sources familiar with the matter, Singh made it clear that the state’s policy would remain unchanged, despite lobbying efforts by major 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 aimed at boosting EV production.

The concern among EV producers is that other states may follow Uttar Pradesh’s lead, offering 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 per cent, while hybrid cars are taxed at 43 per cent, which is slightly lower than the 48 per cent tax rate for gasoline-powered vehicles. The addition of state road and registration taxes, which are determined by local governments, further complicates the pricing dynamics in the automotive market.

The UP government’s decision to maintain the tax waiver is likely to 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 competitive landscape for hybrid and electric vehicles in the country.