According to foreign media reports, India's Uttar Pradesh state (Uttar Pradesh) announced that it will exempt hybrid cars from some taxes and fees, a move that will reduce the price of hybrid cars by 10 per cent. This marks a big win for Toyota in its lobbying efforts, and raises industry and analyst expectations that other states may follow suit.
The government of Uttar Pradesh, India's most populous state, said in a notification issued on 5 July that, like electric cars, it will also exempt some hybrid vehicles from registration tax. Hybrid cars use both an electric motor and an internal combustion engine, thus saving fuel.
Maruti Suzuki is India's largest carmaker and has partnered with Toyota to produce and sell hybrid cars. Shares of Maruti Suzuki have jumped 5.5 per cent since the Uttar Pradesh notification was first reported in the local media. Uttar Pradesh is said to account for 10 per cent of India's total car sales.
With its best-selling Hycross and Hyryder SUVs, Toyota has an 85 per cent share of the hybrid car market in India, so the company is likely to be the main beneficiary of the move, followed by Maruti Suzuki. Toyota and Maruti Suzuki did not respond to requests for comment from foreign media.
The tax exemption in Uttar Pradesh applies to so-called strong hybrids (which can run on an electric motor for a period of time) and plug-in hybrids.
India's government under Prime Minister Narendra Modi has focused its push for environmentally friendly transport on electric vehicles, offering millions of dollars in incentives to companies that produce them, while giving no concessions for hybrids.
India levies a federal sales tax of just 5 per cent on electric cars, while hybrids are taxed at a whopping 43 per cent, close to the 48 per cent levied on petrol cars. States also levy a separate registration tax, which further adds to the overall cost of buying a car.
Toyota, the world's top-selling carmaker, has long lobbied the Modi government for tax breaks on hybrids, which the company argues are less polluting than petrol cars, but has received little policy support.
Honda, which also sells a hybrid version of its popular City sedan in India, said the decision "will undoubtedly attract more customers to India's eco-friendly transport mission."