Government’s much ambitious Goods and Services Tax (GST), has virtually killed India’s hybrid vehicle market.
A year after GST regime come into force, sales have come crashing down with companies altering plans to introduce any new hybrid vehicles, which are considered an interim green fleet till electric cars become viable and affordable.
While South Korean Hyundai has junked its hybrid car plans, leading companies like Maruti Suzuki and Toyota have seen a drop of over 70% in sales of their hybrid cars.
The GST Council last year imposed a cess of 15% on hybrid vehicles, in addition to the 28% GST, taking the tax burden of 43% from the previous 28% tax that has killed its demand across India.
Companies like Toyota Kirloskar say that they used to sell 110 Camry Hybrid sedans every month on an average before the cess was imposed effective July 2017. This has come to an of just 30 cars a month. A steep 15% cess has proved to be extreme for most prospective buyers.
For models like the Camry Toyota claims its hybrid variant gives a 48% higher mileage at around 19.16 km on every litre of petrol against the non-hybrid regular petrol variant’s mileage of almost 13 km. The company claims that till date over 3500 Camry Hybrid sold in India is estimated to have together saved 1.05 million litres of petrol besides reducing C02 emission in a big way.
Similar is the case of Maruti Suzuki Ciaz. Maruti had introduced mild hybrid features in the Ciaz sedan (diesel variant) few years back and this variant generated 70% of Ciaz volumes in India. What comes as a complete surprise the situation has reversed post the GST cess imposition and now a majority of the Ciaz sales comes from petrol.
The price has made a huge difference. Maruti Ciaz sigma Smart Hybrid variant was selling at an ex-showroom price of Rs 789,000 in Delhi. It now commands a price of Rs 950,000. The increase has been as high as 20% in Delhi.
For Toyota the Camry Hybrid comes at the price of Rs 37.2 lakh (ex showroom Delhi) now, and used to sell at much lower Rs 32 lakh before the cess. Besides the cess increase, hybrid cars in Delhi lost the value added tax (VAT) advantage they enjoyed in pre-GST regime.
The Delhi government had allowed a low value added tax (VAT) of five per cent on hybrid vehicles against 12.5 per cent on other vehicles. The higher taxes and dwindling sales has discouraged Toyota from expanding the hybrid range. It had brought only hybrid variants for its Prius luxury brand, but higher GST tax rate has virtually evaporated demand in the market.
In fact, in the past one year, no new hybrid car has been launched in India. Hyundai Motor India has decided to give up plans to bring its hybrid cars to India. The Honda Accord hybrid sedan launched in October 2016 at a price of Rs 37 lakh that has risen to Rs 43 lakh in the capital has killed such a popular brand with no demand for the past few months.
While discouraging hybrid technology the GST Council also decided to promote electric vehicles by setting a low rate of 12%. Senior automotive executive said India needs to have a mix of different mobility technologies across the frame of fuel and costs.
So why is there such a difference towards hybrids which are relatively well accepted across the developed markets like Japan, US or Europe. There is a growing perception from indigenous automakers in favour of electric and against hybrid.
In fact, in the past one year since the GST taxes came into force, differences between home grown and leading Japanese car makers on the role of hybrid technology came out in the open.
Earlier this year Tata Motors managing director and chief executive officer Guenter Butschek said electric mobility is the future and there should be no incentive for hybrid vehicles. Toeing a similar line, Pawan Goenka of Mahindra & Mahindra also favoured full-electric vehicles as a long term solution to address the transport needs of a growing market like India.
