New Delhi: Supportive government policies and a favourable tax regime for all electrified technologies (xEVs), including the strong hybrid electric vehicles (SHEVs), are essential for the rapid mass electrification of mobility, according to Vikram Gulati, senior vice-president, Toyota Kirloskar Motor.
“Rationalization of taxes on strong hybrid vehicles may not have any major impact on government revenues. It is expected to be largely revenue-neutral as the number of hybrids sold now is small. Moreover, due to the price elasticity of demand, passing on of the tax benefits to the consumers will spur overall sales. This will more than compensate the revenue loss if any,” Gulati told ETAuto.
A favourable tax regime can catalyse rapid mass electrification displacing conventional petrol vehicles by xEVs and SHEVs. This will expedite the establishment of a local eco-system for EV parts manufacturing while avoiding large-scale disruption to the huge investments of the conventional automotive industry, he added.
Toyota has been a global trendsetter with sales of 15 million units of hybrid electric vehicles across all its brands since the launch of the first hybrid model, Prius in 1997. But in India, the company could sell only about 5400 units of hybrid electric vehicles, out of which 4900 were Camry hybrids. Toyota’s current offerings include SHEVs like Prius, Camry hybrid, Lexus ES and the recently-introduced Vellfire.
In India cost of acquisition and range anxiety are the main hindrances in the uptake of electric vehicles, hybrid vehicle is an important stepping stone in the gradual transition to fully electric. As hybrid cars are supported by a gasoline engine and they need only less expensive battery packs their overall acquisition costs are lower.
According to a study by iCAT, a SHEV can run 40% of the distance and 60% of the time as a Zero Emission Vehicle (ZEV) with the petrol engine shut off using a smaller advanced battery. This gives SHEVs 40-50% fuel efficiency improvements, much lower carbon emissions and meets the usage needs of customers without having the challenges of charging infrastructure, charging time, range anxiety along with required performance.
As hybrids have two powertrains, their cost is higher than petrol vehicles. Despite the small tax rate advantage, the total tax on SHEVs will be more than that of the petrol version.~
However, one of the key barriers to the mass adoption of SHEVs in India has been the high rates of GST, road and registration taxes. Therefore, despite the operation-side savings from better fuel efficiency, the high acquisition cost makes SHEVs financially unviable for consumers.
The US, China, Japan, and Thailand follow a technology-neutral policy that supports all xEVs, including SHEVs, PHEVs, BEVs and FCEVs, through lower or proportionate taxation and other measures. Many countries continue to have lower tax on SHEVs/PHEVs through a policy that links vehicle tax rate to their fuel efficiency.
In India, SHEVs are eligible for FAME 2 incentives and have lower GST rates than petrol vehicles. But the difference is only marginal.
“As hybrids have two powertrains, their cost is higher than petrol vehicles. Despite the small tax rate advantage, the total tax on SHEVs will be more than that of the petrol version”, Gulati said.
In March 2019, Toyota announced the supply of THS (Toyota Hybrid System) to Suzuki globally, including in India.
According to media reports, Toyota and Suzuki are working on bringing affordable hybrid cars to India and reportedly plan to introduce the hybrid technology in a sedan segment in 2021–2022.
Gulati, who refrained from commenting on that and future business plans, said, “Both Toyota and Suzuki will work together also on electrified technologies, including SHEV technologies, in India through local procurement of systems, parts, and batteries.”
