Tata Motors CEO: Tax benefits on hybrid cars (Maruti Ciaz & Toyota Prius) is a backward step

The Tata Motors CEO Guenter Butschek has come out strongly against incentives for hybrid cars. A recent proposal at the Ministry of Heavy Industry seeks to cut taxes on hybrid cars, bring them at par with electric cars that are taxed at only 12 % GST. Currently, hybrids are taxed at 43 %. The steep reduction in duty on hybrid cars is said to be sought by Maruti Suzuki and Toyota, which already have mild hybrids and full-hybrid cars respectively.

On the other hand, car makers such as Mahindra and Tata Motors have been betting big on electric cars. Both automakers produce electric cars in India, which are also a part of a government program that seeks to make electric cars more popular by making government departments shift to them from petrol/diesel powered cars. Meanwhile, here is what Guenter Butschek said,

I don’t get it anymore, I really don’t. Why do we consistently go from left to right instead of aligning everything towards electrification. The MOVE summit was about electrification. Except representatives of one part of the world who has brought back the hybrid story for consideration, everyone was talking about electric vehicles. This is like taking two steps forward and three steps backwards. I am speechless. I do hope this is not more than an intent and that the subject is open for discussions otherwise we are going to bring a huge degree of confusion to the larger industry, including the private sector which is finalising investments. There are so many companies ready to set-up charging stations and even battery manufacturing factories. Now, suddenly with hybrids there is no need for those investments. So far there is no change in policy of the government, but it is a discussion at the Department of Heavy Industries (DHI). I do not support this statement of intent. The government does not have an unlimited budget to support sustainable mobility. So prodding something that is anyway required in order to meet CAFE norms (hybrid) in 2022 is a must because as diesel share declines you need to compensate for higher CO2 which comes with a petrol engine. At no point in the past has the industry ever enjoyed a subsidy from the government for something that is already technologically required. It is not ethical to ask the government to actually subsidise your technological needs.

From the above statements, it can be inferred that Mr. Butschek has three critical points,

1. Government policy should not be changed from time to time as this makes business difficult. Car makers are already heavily invested in electric vehicle technologies and policy flip flops will lead to big losses.

2. Such a policy change at the behest of a lobby will make adoption of electric vehicles much slower in India. This will slow down the government’s push towards electrifying vehicles and making India less reliant on fossil fuels.

3. It’s unethical for the government to subsidize a regulatory requirement of a car company from tax payer money.

The counter point made by those supporting hybrids is that India is not fully ready to adopt electric cars. The supply chain required for such a large scale move from petrol/diesel cars to electric cars is not yet developed, and capacities for electric car manufacturing on a large scale has not been set-up yet.

Charging infrastructure is nearly absent in most parts of India. Electric cars are significantly costlier than petrol/diesel/hybrid cars. Allowing tax benefits for hybrids will allow this technology to act as a bridge between petrol/diesel cars and full electric cars.

As things stand today, the Maruti Ciaz is sold with a mild-hybrid system, and is taxed at 43 %. If the proposal from the ministry of heavy industry goes through, the Maruti Ciaz could get cheaper by a whopping Rs. 1 lakh.

Via MoneyControl