The Indian auto industry being one of the largest and India being one of the most dynamic automotive markets in the world, has been a testbed of vehicular technologies. If one technology has to be named that has been finding an increasing footprint amid the growing focus on electrification, it is the hybrid powertrain.

There has been a strong discussion around the need for tax sops for hybrid vehicles, especially advocated by automotive brands like Maruti Suzuki and Toyota. On the other hand, there has been opposition to this demand as well, especially from carmakers like Tata Motors, Hyundai etc.

When it comes to the topic of tax sops for hybrid vehicles, there has been a clear divide among the automakers in India, which emerged at a large scale just a few days back when four auto majors, namely Tata Motors, Hyundai, Kia and Mahindra wrote separate letters to the Uttar Pradesh government lobbying against the tax sops the state government announced a few weeks back.

These developments clearly show how the auto industry is divided into two camps in the question of promoting hybrid vehicles.

Watch: Maruti Suzuki Grand Vitara: First Drive Review

What brought Indian auto industry here

Just a few weeks back, right before the Union Budget 2024-2025, the Uttar Pradesh government announced tax sops for hybrid vehicles. The strong hybrid and plug-in hybrid vehicles were made eligible for exemption of registration fees in the state, giving a shot in the arm to automakers like Maruti Suzuki and Toyota who sell hybrid cars in the country.

While Toyota has remained at the forefront of hybrid powertrain technology in India, Maruti Suzuki has its smart hybrid models in the lineup, as well as the strong hybrid model Grand Vitara on offer. The move of tax exemption for the strong and plug-in hybrid vehicles met appreciation from these automakers. According to these automakers, hybrid vehicles can be a perfect bridge between ICE vehicles and EVs.n Also, they claim that hybrid vehicles emit fewer pollutants, which makes them eligible for a tax advantage.

However, on the other hand, major car manufacturers such as Tata Motors, Hyundai, Mahindra and Kia, which have been pushing hard for electric vehicles, have something different to say. Tata Motors, which leads the Indian electric passenger vehicle market with its models like Tiago EV, Tigor EV, Nexon EV, and Punch EV has been saying that despite having electrification technology, the hybrid vehicles emit pollutants into the environment, even though in lesser quantities compared to pure petrol or diesel vehicles. Hence, hybrid vehicles should not be receiving any tax benefit when it comes to providing tax sops to cleaner vehicles. Hyundai too has opposed tax reduction for hybrid vehicles.

Why this divide

The division between the two camps in the Indian auto industry is more related to their own profit and loss from business rather than environmental concerns. Uttar Pradesh alone accounts for 10 per cent of India's total passenger vehicle sales. The registration fee waiver in the state has made some hybrid cars 10 per cent cheaper in the state. Consumers of some of the strong and plug-in hybrid vehicles in the state enjoy saving a hefty amount while purchasing the concerned cars.

The biggest beneficiaries of this tax waiver are Maruti Suzuki, Honda and Toyota, as these carmakers sell hybrid cars in the mass-market segment. Maruti Suzuki sells the Grand Vitara and Invicto, while Toyota sells the Innova Hycross and Camry. Honda City too has a hybrid variant. Clearly, buyers of these models have been enjoying the benefits. Consumers who have been mulling the plan to buy a car with a pricing range close to these models can also shift their focus on these cars instead of other models that are not enjoying the tax benefit.

On the other hand, Tata Motors, despite holding about 85 per cent market share in the Indian electric passenger vehicle market, doesn't sell any hybrid cars. The other three automakers that lobbied the UP government against the tax concession for hybrid vehicles too have no such offering that comes under the ambit of a registration fee waiver for hybrid vehicles. Instead, all of these auto OEMs have been aggressively pushing for electric vehicles.

In such a situation, these OEMs fear losing a chunk of potential consumers to their rivals who sell strong and plug-in hybrid models.

What anti-hybrid lobbyists say

In their major lobbying to the UP government, Hyundai, Kia, Tata and Mahindra have reportedly opposed the tax waivers, citing the impact on India's goal of ensuring that 30 per cent of new car sales by 2030 will be pure electric, reported Reuters.

Tata Motors which raised $1 billion in 2021 for its EV business, reportedly said in its letter that favouring hybrid vehicles put the Indian auto industry's $9 billion investment committed to developing electric vehicles. The OEM also added that this investment was the result of a clear focus on the sector by the government.

Hyundai, which is gearing up for a $3 billion Indian IPO, reportedly said in the letter that the move would derail the electrification of transport, while Kia said promoting hybrid vehicles would negatively impact widespread EV adoption. Mahindra's letter too flagged concerns about disruption to the EV market.

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