Toyota Motors Lobbying the Indian Government to Cut Taxes on Hybrids

Toyota Motor of Japan is lobbying the Indian government to cut taxes on hybrid vehicles by up to one-fifth, claiming they are far less polluting than petrol cars but do not receive commensurate policy treatment, according to a company letter. The world's largest automaker intends to increase production capacity to meet a surge in Indian demand for hybrids, but Prime Minister Narendra Modi's government has prioritised electric vehicle (EV) sales, offering companies millions of dollars in incentives to build EVs and batteries.

In India, electric vehicles are taxed at 5%, while hybrids are taxed at 43%, just below the 48% levied on petrol vehicles.

According to Toyota's letter to Modi's Niti Aayog think-tank, which plays a key role in policymaking, this 5-percentage-point differential favouring hybrids over petrol cars is "insufficient" given the lower emissions and better fuel consumption hybrids offer. According to the letter from Toyota's India country head, Vikram Gulati, the tax differential over petrol cars should be as much as 11% for hybrids and 14% for flex-hybrids.

According to Reuters calculations, this amounts to a tax rate of 37% on hybrids and 34% on flex-hybrids, representing savings of up to 14% and 21%, respectively.

"We would kindly request for a proportionate policy support," Gulati wrote in the Sept. 20 letter, which has not previously been reported.

Toyota, which popularised hybrid technology with the Prius, has faced criticism from investors and climate groups for still supporting hybrids, which it says make better sense for markets where the infrastructure is not ready for EVs.