Pay less tax for hybrid cars in India?

The Center is working to create a fair structure that aligns tax rates with emission standards and a team of experts is currently reviewing global and national data and reviewing OEM claims. These remarks were made by Arun Goel, Secretary of the Department of Heavy Industry at a recent SIAM roundtable moderated by Coach India Publisher Hormazd Sorabjee.

The government is fuel independent and the same benefits will be extended to hydrogen fuel cells, ethanol-based technology as much as hybrids – cars that use both electricity and gasoline, said Goel.

The Center currently imposes a 5% tax rate on electric vehicles. Smaller hybrids currently attract a 28% tax while larger hybrid siblings attract a 43% tax. Honda’s recent e:HEV attracts that while cars like the Baleno hybrid attract the old tax. For internal combustion engine (ICE) vehicles, the tax rate is 29% for small vehicles and 45% for large vehicles.

Boost for hybrids
Recent launches have given hybrids a boost. The Toyota HyRyder has a six month waiting period while its Maruti badge designed, Grand Vitara, has 53,000 reservations, including 43% for strong hybrid versions.

“If hybrids run 50% or even more on electricity, there must be some sort of support or incentive to promote them because they are environmentally friendly,” says Shashank Srivastava, chief executive of Maruti Suzuki. . Vikram Kirloskar, Vice President of Toyota Kirloskar Motor, said, “When we lower prices, we hope to increase our numbers as well as our market share. »

Toyota’s renovated Bidadi plant can produce nearly 3.10,000 vehicles per year. The Grand Vitara has powerful hybrids and will share the site with Toyota, giving both the economies of scale needed to ramp up production to meet demand.

Harshwardhan Sharma, Head, Automotive Retail Consulting Practice at Nomura, says harmonizing taxes on all alternative powertrains will be a welcome step as it inspires consumers to make greener choices. Citing an example, he said: “A concrete example is in the United States where all-electric and plug-in hybrid cars purchased in or after 2010 are eligible for a federal income tax credit of up to $7,500. Additionally, national and/or local incentives may also apply. The need for the Center is to see the benefits that hybrids bring to the table and to streamline taxation in line with global standards,” he said.

In the last fiscal year, 115,032 hybrid cars were sold in India according to Vahan data, or about 4.2% of the total sales of 2.7 million passenger vehicles sold, including mild hybrids.

Last year, only 831 potent hybrids were sold, including the Toyota Camry and a handful of Vellfires. “We could see up to 8-10% penetration over the next three years. With the arrival of powerful and affordable hybrids, this market will see a strong recovery as consumers care about the planet and want a without anxiety,” Harsh of Nomura pointed out. Hybrids are great for consumers who want a lower carbon footprint and proven technology, while still experiencing the thrill of driving an ICE, he said. It may be recalled that among the first hybrids in India were the Toyota Prius and the Honda Civic, both of which are now unavailable.

Toyota’s next hybrid for India will be a multi-purpose vehicle, or people carrier, expected later this year or early 2023, a company official has said. The company plans to strengthen its supply ecosystem and is stepping up local manufacturing of its E-Drives, which provide seamless switching between motor and electric motor, for the Toyota Hybrid system. These discs are made with the parts subsidiary Aisin Seiki Company.

The JV has identified a capacity of 135,000 units which can be increased to 400,000 E-Drives by adding two more assembly lines at its Bidadi plant, sources added.

The automaker’s strategy with Maruti’s low-cost manufacturing is to reduce the cost of full hybrid powertrains by manufacturing them in India. By combining hybrids with a low-cost chassis and some superior body parts from Suzuki, Toyota is looking to significantly reduce the cost of hybrids.

The road ahead
Maruti Suzuki India Chairman RC Bhargava was very radical in his view, saying that the Indian passenger car journey in the domestic market is an arduous journey. Price parity between conventional fuel cars and electric vehicles will occur in the long term. This is due to a complicated mix of getting the right battery technology, charging infrastructure and price to ensure the customer has a smooth transition

“In India, there is room for all kinds of fuels. CNG cars are developing very quickly. India will go the CNG route first, then hybrids and then electric,” Bhargava said.

Srivastava says the increasing shift to powerful hybrids will also reduce demand for diesel SUVs from the current 51%.

In passenger cars and commercial vehicles, gasoline accounted for 68% of sales, diesel 19%, and CNG 8%, in fiscal year 2022. Currently, on-road hybrid prices are 30% higher than those of their ICE counterparts, but this gap is reduced with the price of Toyota Hydryer. 1.5 Powerful Hybrid Petrol e-CVT starting at Rs 18.99 lakh.

CRISIL Research suggests that hybrid vehicles can compete for market share with diesel vehicles and not gasoline or CNG variants on the basis of cost savings. The current price differential between a hybrid and petrol variant is around 30%, while that between a hybrid and a diesel is 15%. For a personal gasoline vehicle buyer who travels an average of 10,000 km per year, the break-even point for a hybrid would only be more than 10 years based on current ARAI mileage figures, says Pushan Sharma, director of CRISIL research.

Sharma is of the view that with upcoming emission standards, the price gap between hybrid and diesel should narrow, due to the higher cost needed to upgrade diesel to meet these standards. .

He adds that the introduction of Hybrid Electric Vehicles (HEVs) is beneficial for OEMs considering CAFÉ and BSVI standards. Although it will increase fuel efficiency by nearly 50% over that of gasoline, the high initial cost of the vehicle will make economic costs unfavorable to consumers.

“However, unlike the common design of HEV as an intermediate step between EV and ICE, the battery capacity of an HEV is less than 10% of the capacity of a similarly sized EV. Therefore, the price reduction of batteries over the next few years not fully reflected in the price of an HEV as it would in the case of an EV.” He explains further. Even as battery prices go down, automakers are constantly looking to increase their prices in the face of strong demand, but not all are able to counter the trend.

Honda Cars India’s recent decision to increase the price of its City HEV from Rs 39,100 to Rs 19.92 lakh has not gone over well with its customers. Its August 2022 figures led to a 24% drop in total passenger car sales and a 30.49% drop in domestic sales year-on-year. Its CEO was quoted as saying, “We are in the process of updating our product portfolio and from next year you will see a host of products coming to the Indian market, especially our hybrid SUVs which will bring us back in the calculation”.

Our sister publication Coach India previously announced that Honda would soon cease production of three of its aging models – the Jazz, fourth-generation City and WR-V – in India. This will leave the Japanese automaker with just two models in its Indian portfolio – the fifth generation City and Amaze. However, a critical third model – a compact SUV (code name: 3US) – is expected to join the lineup in 2023. This offering is also expected to get a powerful hybrid engine from the Honda City HEV. The company also recently teased a next-generation CR-V in a series of photos revealing part of the crossover’s front and rear profile. The images also carry a “hybrid” badge on the rear of the vehicle revealing that the new CR-V will be offered with a powerful hybrid powertrain.

Globally, Honda is making a big leap towards hybrids, with the company set to launch electrified versions of the new Accord, Civic and CR-V in the next two years. Honda will slowly transition from gasoline-only cars to hybrids and then to all-electric vehicles, says Dave Gardner, the company’s executive vice president of business and sales, Honda Cars.

The CR-V hybrid will go on sale before the end of the year, with new Civic models replacing the Accord and the Insight due to arrive in 2023. Honda expects these hybrids to account for 50% of the model’s overall sales.

Kunal Behl, Vice President, Marketing and Sales, Honda Cars India is of the view that India needs a rapid shift to greener technology that can be adopted by the masses.

Honda, Suzuki and Toyota’s preference for hybrid technologies over battery electric vehicles (BEVs) is seen as an indication that Japanese automakers believe the latter are too expensive to own for mainstream car buyers in the emerging markets like India. Suzuki and Toyota will share hybrid technology backed by local sourcing. Hybrid vehicles account for 24% of Suzuki’s sales globally, and the company is also working to replicate the success in India.

The government has so far spent about Rs 1,400 crore out of the Rs 10,000 crore allocated under the second phase of the Faster Adoption and Manufacture of Hybrid and Electric Vehicles (FAME-II) scheme. The Union Budget for FY23 has focused on the sector and tripled the allocation of funds for the FAME program from Rs 800 crore last year to Rs 3,000 crore for l ‘current year.

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