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Toyota Urges India to Cut Taxes on Hybrid Vehicles

Toyota Motor, the world's largest automobile manufacturer, is actively lobbying the Indian government to decrease hybrid vehicle tariffs by up to 20%.

Toyota Motor, the world’s largest carmaker, is actively lobbying the Indian government to reduce taxes on hybrid vehicles by up to 20%. 

The company argues that hybrid cars are significantly less polluting than traditional petrol vehicles but currently face a disparity in policy treatment.

Expanding Hybrid Production in Response to Indian Demand:

Despite the challenges, Toyota plans to expand its production capacity in India due to a growing demand for hybrid vehicles.

India has primarily focused on promoting electric vehicles (EVs), offering substantial incentives to companies to manufacture EVs and batteries. 

The tax rate for EVs is a mere 5%, while hybrid vehicles are taxed at a much higher rate, reaching 43%, just below the 48% tax imposed on petrol cars.

Toyota’s Plea for Equal Treatment:

Toyota argues that the current 5% tax differential favoring hybrids over petrol vehicles is insufficient, considering the reduced emissions and improved fuel efficiency. 

The company believes the tax differential should be increased to 11 percentage points for hybrid vehicles and 14 points for flex-hybrids.

Toyota’s Request for Tax Reduction:

In practical terms, this would mean a tax rate of 37% for hybrids and 34% for flex-hybrids, representing a potential tax cut of up to 14% and 21%, respectively.

In a letter to Prime Minister Narendra Modi’s Niti Aayog think-tank, Vikram Gulati, Toyota’s India country head, requested “proportionate policy support” and emphasized the environmental benefits of hybrid technology.

Diverging Stances of Indian Automakers:

Indian automotive giants Tata Motors and Mahindra & Mahindra endorse electric vehicles, while Toyota and Honda Motor advocate for government support for hybrid cars.

Hybrid Technology’s Role in Infrastructure-Deficient Markets:

Toyota, known for popularizing hybrid technology with models like the Prius, argues that hybrids make more practical sense in markets where infrastructure is not yet ready for electric vehicles.

In addition to reduced taxes, Toyota also requests that the Indian government include hybrid cars in existing incentive programs that provide discounts to EV buyers, a scheme currently limited to electric vehicles.

Toyota’s Vision for Climate Mitigation:

While Toyota has begun developing electric vehicles, the company asserts that the most effective way to reduce carbon emissions is through a combination of electrified and alternative energy options, encompassing both EVs and hybrids.

The Cost Challenge of Hybrids in India:

Toyota highlights that India’s tax structure, along with the typically higher cost of hybrid powertrains, which include engines and electrified components like batteries and motors, makes producing hybrid vehicles 30-35% more expensive than their petrol counterparts.

A Multi-Pathway Approach to Climate Crisis:

Toyota is championing EVs and advocating for hydrogen-powered cars, asserting that a “multi-pathway” approach is essential to address the climate crisis.

As of the reporting time, Niti Aayog has not responded to Toyota’s request for comment and policy adjustments.

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