Toyota Urges Indian Government to Reduce 43% Tax on Hybrid Vehicles

Toyota Camry hybrid green cars

Japan’s Toyota Motor has formally requested the Indian government to slash taxes on hybrid vehicles by as much as one-fifth, according to a recent Reuters news report.

In a letter addressed to Prime Minister Narendra Modi’s Niti Aayog think-tank, Toyota argued that hybrid vehicles are significantly more environmentally friendly than traditional petrol cars but have not received proportional policy support. The world’s largest carmaker expressed its intentions to expand production capacity in response to the rising demand for hybrids in India.

However, the Indian government has been primarily focused on promoting electric vehicles (EVs) and has offered substantial incentives to encourage the production of EVs and batteries. Currently, India imposes a 5 percent tax on EVs, while the tax rate on hybrids stands at a much higher 43 percent, just below the 48 percent applied to petrol cars.

Toyota contends that the 5-percentage-point tax differential favoring hybrids over petrol cars is “insufficient,” considering the reduced emissions and superior fuel efficiency that hybrids offer. In their letter, Toyota’s India country head, Vikram Gulati, proposed that the tax differential should be increased to 11 percentage points for hybrids and 14 points for flex-hybrids. This would result in tax rates of 37 percent for hybrids and 34 percent for flex-hybrids, representing a potential reduction of up to 14 percent and 21 percent, respectively.

The company, known for popularizing hybrid technology with its Prius model, has faced criticism from investors and climate advocacy groups for its continued support of hybrids. Toyota contends that hybrids are a more pragmatic option in markets where the infrastructure for electric vehicles is not yet fully developed.

While Indian auto giants Tata Motors and Mahindra & Mahindra are championing EVs, Toyota and Honda Motor continue to advocate for hybrid vehicles. Toyota has emphasized that the “most optimal way” to reduce carbon emissions is through a combination of electrified and alternative energy options, encompassing both EVs and hybrids.

In addition to tax reductions, Toyota has also urged the Indian government to extend its incentive program, currently applicable only to EVs, to hybrid cars as well. The incentive program offers discounts to buyers as an encouragement to adopt more environmentally friendly vehicles.

Toyota declined to comment on the content of the letter. Toyota reiterated its commitment to finding comprehensive solutions to address the climate crisis, including the development of EVs and hydrogen-powered vehicles. The company emphasized the need for a “multi-pathway” approach to combat environmental challenges.