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Hyundai opposes duty relief on hybrids, says it will hurt petrol vehicles

Government of India has proposed to reduce GST on hybrid passenger vehicles to 5% and 12% on flex engines, while GST on diesel and petrol vehicles will remain at 28%

Hyundai, Hyundai Motor

Hyundai

Vasudha Mukherjee New Delhi

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Ahead of its IPO filing, Hyundai has become the latest among car manufacturers in India to raise objections to duty relaxations for hybrid vehicles, arguing that such measures could disrupt the sales of petrol and diesel vehicles. It has joined domestic car companies such as Tata Motors and Mahindra in raising this objection, according to a report by The Times of India.

Top Japanese companies like Maruti Suzuki, Toyota, and Honda have also been advocating for lower duties on hybrids in India. These companies have claimed that the technology reduces emissions and enhances fuel efficiency.

In regulatory documents filed with Sebi ahead of its initial public offering, Hyundai stated, “In particular, with the objective to address climate issues, the Government of India proposes to reduce the goods and services tax (GST) on hybrid passenger vehicles to 5 per cent and 12 per cent on flex engines, while the GST on diesel and petrol vehicles is proposed to remain at 28 per cent.”

Current and proposed GST rates on passenger vehicles

GST on passenger vehicles in India ranges from 5 per cent to 28 per cent currently, with the most relevant rate for cars being 28 per cent. In addition, a compensation cess of up to 25 per cent could be levied on top of the 28 per cent GST.

Hyundai expressed concerns that a reduced GST for hybrids could adversely impact the sales volumes of their diesel and petrol vehicles, affecting their “margins, business, and operations”.

The Government of India has also approved the Scheme to Promote Manufacturing of Electric Passenger Cars in India (SPMEPCI) as of March 15, 2024. This scheme includes a lower customs duty of 15 per cent for a period of five years, provided that manufacturing facilities are established in India within three years, with a minimum investment of Rs 41,500 million.

Opposition from Tata Motors and Mahindra

Tata Motors and Mahindra oppose special benefits for hybrids, arguing that only electric vehicles (EVs) should benefit from the 5 per cent GST rate. Both automakers have emphasised that incentives should be reserved for ‘zero emission vehicles’, not those offering only ‘fuel efficiency improvement technologies’.

Shailesh Chandra, MD of Tata Motors’ Passenger Vehicles and Electric Mobility Divisions, told TOI, “So, if it’s not plugged into electricity, I don’t think it qualifies for being an electric or should be compared with an EV technology. The source of energy for a hybrid comes from two sources – regenerative braking to a small fraction, and the rest from a gasoline engine. So, effectively the source of energy for hybrids is a gasoline engine. Comparing a hybrid with an EV is very motivated as people feel that such a comparison can make hybrids qualify for policies which are supportive of electrification.”

Auto industry concerns over tax concessions

Hyundai, Tata Motors, and Mahindra fear that tax concessions for hybrids could negatively affect their sales and profitability in the petrol and diesel segments. The debate highlights the tension between promoting advanced fuel efficiency technologies and fully electric vehicles in India's evolving automotive industry landscape.

Hyundai IPO filing

Hyundai Motor India Limited is a subsidiary of South Korean auto giant Hyundai Motor Co. The automaker plans to offer 17.5 per cent of its stake in an initial public offering (IPO). The IPO filing aims to raise around $3 billion (Rs 25,000 crore approx).

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First Published: Jun 18 2024 | 6:08 PM IST

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