With hybrids getting heavily taxed in the GST regime, the company will now monitor demand patterns for the regular and 'Intelli-Hybrid' version of the Scorpio and take a call on future production.
06 Jul 2017 | 6241 Views | By Mayank Dhingra
Mahindra & Mahindra, which is among the Indian OEMs affected by the high GST taxation on hybrids, could be doing a rethink on this vehicle category.
As is known, hybrids have come out as losers in the GST regime with a substantial 12.7 percent hike in effective tax. In the ...
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Mahindra & Mahindra, which is among the Indian OEMs affected by the high GST taxation on hybrids, could be doing a rethink on this vehicle category.
As is known, hybrids have come out as losers in the GST regime with a substantial 12.7 percent hike in effective tax. In the past, to popularise the fuel-saving technology, the government had set hybrid taxation at 30.3 percent and also did not differentiate between mild and full hybrids. This rate was lower than even compact petrol vehicles which were taxed at 31.5 percent.
With GST, the government has shifted hybrids into the same tax bracket as large vehicles which attract an effective rate of 43 percent (28% GST + 15% cess). In its recommendations to the GST Council, industry body, Society of Indian Automobile Manufacturers (SIAM) has suggested a review of the tax slab and proposed a 10 percent rate cut.
M&M launched the Scorpio with its mild hybrid technology ‘Intelli-Hybrid’, offering reduced fuel consumption of up to 7 percent, with the 1.99-litre mHawk engine in September 2016. Intelli-Hybrid is available on the S4, S4+, S4+ 4wd, S6+, S8, S10-2WD (Manual Transmission) and S10-4WD (Manual Transmission) variants of the popular SUV.
The company considers the government's move to tax hybrids heavily as not being an accidental one. According to managing director Dr Pawan Goenka, "With review recommendations already submitted to the GST Council and no update having been received yet, it is clear that the decision to substantially tax hybrids was not an accident from the government's end. It was a well-thought-of step. I do not expect the slab to be changed now. It now seems firm and final."
“Hybrids become less attractive and difficult to justify; with no GST concession for hybrids, many players including Mahindra & Mahindra will now do a rethink on hybrids,” said Dr Goenka.
As a consequence, the company will be taking a relook at its product strategy and will eventually take a call whether to pull out such products from the market completely. "Right now, we have passed only a portion of the impact of the increased tax to customers in the form of revised ex-showroom prices. I don't see hybrids selling if the full impact would have percolated down to the end user," he added.
The company will now monitor the demand patterns for the regular and the mild-hybrid-equipped 'Intelli-Hybrid' version of the Scorpio and will eventually take a call. “While we will introduce a non-hybrid version of the Scorpio, the hybrid may get phased out,” he said.
Nevertheless, he added, that the company will continue with its R&D effort in the areas of mild-hybrid, full-hybrid as well as 48V hybrid technologies, so as to be ready with the products when the right time comes, but, Mahindra will put launch of these products on hold, until hybrids become a viable option with a tax revision.