Uttar Pradesh waives road tax on strong hybrid cars; Maruti Suzuki shares zoom 6%

Strong hybrid cars have become cheaper in Uttar Pradesh by around 10% as the state government has now removed the road tax on those vehicles. Following the news on hybrid vehicles becoming cheaper, India's largest passenger car maker Maruti Suzuki saw its share price jump 7.8% in Tuesday's intraday trading.

The UP government announced its decision to exempt strong hybrid and plug-in hybrid cars from road tax and registration fees, along with electric vehicles for three years in its EV policy which was unveiled in 2022. However, dealer sources told Autocar Professional that the state had not previously implemented the zero-road tax for hybrids but started doing so ten days ago. UP levies a road tax of 8-10% on petrol or diesel cars, depending on the cost of the vehicle.

The waiver of road tax comes at a time when major hybrid vehicle makers in the country such as Maruti Suzuki and Toyota have been pushing the government for lower taxes on hybrids. Maruti Suzuki has been advocating that given the current scenario, hybrid cars are cleaner than EVs in terms of total carbon emissions, considering that almost 75% of India's energy is today generated by coal.

The Minister of Road Transport and Highways, Nitin Gadkari, has also reportedly urged the finance minister earlier this year to reduce the goods and service tax (GST) on hybrid vehicles to 12%. Currently, the GST on vehicles powered by ICE, including hybrids, stands at 28%, while it is 5% on EVs. However, with the inclusion of cess and other state taxes, the total tax on hybrid vehicles in most states is over 43%, depending on the model.

Though there are only a few models available in the market, the sales of hybrid vehicles have been gaining momentum. Several consumers see hybrids as a strong alternative to diesel, not only to give a higher fuel efficiency than petrol but also to offer the experience of an EV without range anxiety, given the limited charging infrastructure in the country.

Around 90,000 hybrid vehicles were sold in India, accounting for nearly 2% of the total cars sold in the country, in the financial year 2023-24. Maruti Suzuki, Toyota, and Honda are the major carmakers offering hybrid vehicles here. A reduction in taxes could further boost the sales of hybrid cars.

Autocar Professional recently reported that Hyundai Motor India is planning to offer a hybrid powertrain in its line-up. Kia India is also actively considering introducing hybrid products in its portfolio. Mahindra & Mahindra's MD Anish Shah has said the automaker is closely looking at hybrid technology and would be ready to introduce hybrid vehicles if there is a strong customer demand.

Maruti Suzuki is now working on a more accessible hybrid solution for India. It anticipates 25% of sales to come from hybrid vehicles by 2030. MG Motors is also working on a new mid-size platform which will have strong hybrid and plug-in hybrid options, whereas the Renault Nissan Automotive Alliance is also exploring a hybrid powertrain option.

However, Tata Motors has been opposing any tax cuts on hybrids, saying hybrids are a temporary solution and should not be a central focus for government incentives.

A strong hybrid, or full hybrid, vehicle consists of a combustion engine and an electric motor. It can run solely on the electric motor in short-distance low-speed city driving. Though a mild hybrid vehicle also has an engine and an electric motor, it cannot run solely on electric power.

Maruti Suzuki offers strong hybrid variants for its Grand Vitara and Invicto models, while Toyota offers Hyryder and Innova Hycross in strong variants. Shares of Maruti Suzuki closed trading on the National Stock Exchange at Rs 12,807, up 6.5% from the previous close.