Hybrid carmakers seek tax incentives as auto industry lobbies for clean mobility benefits
New Delhi: Hybrid carmakers have approached the ministry of heavy industries seeking tax incentives, according to two people aware of the development, even as the automotive industry has raised concerns over tax parity for hybrids and pure electric vehicles.
"Hybrid makers are seeking tax-related benefits because the tax for clean mobility is lower. Electric vehicles have a goods and services tax of 5%, but hybrids are taxed at par with fossil-fuel vehicles," one person said.
Hybrid carmakers had approached the heavy industries ministry over the definition of clean mobility and highlighted the tax differential between fossil-fuel and hybrid vehicles, the second person said. The government will incentivise all forms of clean mobility, Mint reported on 6 June, citing heavy industries minister HD Kumaraswamy.
A draft of the Delhi EV Policy 2.0 proposing parity of incentives between zero-emission electric vehicles and hybrid vehicles propped up a debate in April, leading to consultations between the heavy industries ministry and automakers.
Also Read | Hybrids vs EVs: New advisory for Delhi fleet operators adds fresh fuel to fire
The issue of tax incentives for hybrids has been a longstanding concern, the second person said. The matter involves aspects such as whether India can reduce the reliance on Chinese supply chains for EVs and whether state governments are willing to give up tax revenue to support hybrids.
There is growing clamour to de-risk electric vehicle portfolios from Chinese supply chains, as highlighted by an industry veteran in a letter to Kumaraswamy. A clean mobility strategy that incentivises only electric vehicles is susceptible to trade-related risks, Rajan Wadhera, former president of the Society of Indian Automobile Manufacturers, said in the letter.
"If we pursue only one technology for our carbon-reduction goals, we would be exposing ourselves to serious risk by becoming totally dependent on China," Wadhera said in the letter dated 4 June. However, he added that India can harness alternative technologies such as biofuels, strong hybrids, compressed natural gas, liquified natural gas and hydrogen.
SHEV, PHEV
Most recently, the disruption in rare earth magnet supply chains, which is controlled by China, has exposed the risks of being import-dependent for key industrial components. Magnet supply constraints could impact electric vehicle production.
Maruti Suzuki, India's largest car manufacturer, Toyota and Honda Cars India are among the top makers of hybrids in the country. Maruti Suzuki and Toyota have a strategic partnership under which they share hybrid technology for their vehicles.
Queries sent to Toyota Kirloskar Motor, Honda Cars India, and the heavy industries ministry remained unanswered till publishing time.
Also Read | India 'increasingly important' as Suzuki's global exports hub for EVs, hybrids, small cars: Toshihiro Suzuki
Hybrid vehicles, which use petrol/diesel engines with an electric motor and battery to improve fuel efficiency and reduce emissions, are of two types – strong hybrid electric vehicles (SHEVs) and plug-in hybrid electric vehicles (PHEVs).
While SHEVs run mostly on fossil fuels, a battery-powered motor also aids the powertrain. On the other hand, PHEVs have a charging port for a battery that generates electricity for the car, along with an internal combustion engine that runs on fossil fuels.
According to Rahul Bharti, senior executive officer for corporate affairs at Maruti Suzuki, the company is pursuing multiple technologies for decarbonisation and is trying to make SHEVs viable in India. However, the GST on SHEVs is almost similar to the rate for fossil fuel cars and their ex-factory cost is higher owing to the battery and motor.
'If we get some policy support and the volume of hybrids increases, we could go beyond Li-ion cell localisation to electrode level localisation and secure our supply chain in India," Bharti said.
Compensation cess
Experts said the debate over taxation of hybrid vehicles may boil down to the compensation cess component, which is levied on fossil fuel and hybrid vehicles but not on EVs. Electric vehicles attract a GST of 5%, while hybrids and fossil-fuel vehicles are levied a 28% tax.
Also Read | How hybrids are reshaping India's green auto market
"At present, consumers are subject to a 43% tax on vehicles powered by fossil fuels or hybrids. This consists of a 28% GST and a 15% compensation cess, the latter of which supports state revenues. For certain larger luxury cars, this may be even higher – up to 48%. In contrast, electric vehicles benefit from significantly lower taxation, with only a 5% GST," said Khushboo Jain, principal associate at Roedl & Partner India, a tax consultancy.
"States may have to consider if they want to lower their compensation cess, in case the issue is discussed within the GST Council," Jain addeda
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
New Indian Express
3 hours ago
- New Indian Express
Homely meals ready at Kochi's new Samriddhi Kitchen
Steaming rice with two types of thoran, sambar, pickle and pappadam on a plantain leaf. Simply scrumptious! Those who like to make the meal 'special' can add a seafood or meat dish. We are at Samriddhi@Kadavanthra, which was opened on June 9 as an extension of the corporation's successful 'Samriddhi@Kochi' project that seeks to provide quality food at affordable prices. At `40, anyone who visits the new Samriddhi canteen GCDA headquarters in Kadavanthra can enjoy a homely vegetarian meal. For `30, one can add a fish curry. The space, which has already become a hit, is ambient with paintings on the walls and soft music. Sandra Joseph, a young professional working at a firm in Kadavanthra, says she has become 'a fan'. 'I love the meals they serve. There are other options, too, such as biryani and Chinese dishes. This place is beneficial for students and common folk,' she says. 'The space is neatly maintained, and the premises are hygienic. The food is tasty and worth the money.' The menu includes vegetarian meals, fish curry meals, chicken biryani, ghee rice, and varieties of fried rice and noodles — everything at affordable rates. The facility can accommodate about 60 people at a time, and serves at least 400 every afternoon. The facility, open from 7am to 10pm, also provides breakfast, snacks in the evening, and dinner. 'We see a rush during lunchtime. More people will come to the facility as it gets popular,' says a staffer.
Economic Times
3 hours ago
- Economic Times
'Made in India' Chinese phones ring overseas
Live Events Local Partnerships PLI Support (You can now subscribe to our (You can now subscribe to our Economic Times WhatsApp channel Kolkata: Chinese smartphone and electronic companies have started exporting from India to West Asia, Africa and even to the United States —markets long served almost exclusively from China and Vietnam— amid sustained government nudging and expanding local manufacturing capacities. Oppo Mobiles India for the first time earned foreign exchange of ₹272 crore in FY24 from exports, while Realme Mobile Telecommunications (India) earned ₹114 crore, according to their regulatory filings submitted to the Registrar of Companies (RoC) on May companies are yet to file their financial results for of the largest Chinese brands selling televisions and home appliances, Hisense Group, plans to start exporting locally produced goods to West Asia and Africa from early next marks a notable shift in strategy for Chinese brands operating in India, which had so far focused largely on the domestic market. The change comes amid increased government scrutiny of Chinese firms after the border conflicts with China in 2020 and persistent nudging of Chinese companies have been told in informal forums to localise manufacturing in partnership with Indian firms, build locally owned distribution, export, and appoint Indians in senior management and boards, people familiar with the matter Singhania, managing director of Hisense's local manufacturing partner Epack Durable, told analysts earlier this month that the company is setting up a Rs 100-crore plant in Sri City for Hisense, which will also undertake exports. The plant will replicate the 'designs and everything done' in Hisense's China facility, he Group has also lined up exports of servers and laptops from India, even as its smartphone arm Motorola already exports devices to the US. Motorola phones are manufactured by Dixon Technologies , which is now expanding its capacity by 50% to meet growing export demand, the company told analysts last also manufactures smartphones for Chinese firm Transsion Holdings — the maker of Itel, Tecno and Infinix brands — which has started exporting to electronics and appliances major Haier is also exploring export opportunities, industry insiders brands like Oppo, Vivo, Realme, OnePlus and Xiaomi are now partnering with Indian businesses and some have started exports. RoC filings of Xiaomi, Midea and OnePlus for FY24, though, did not show foreign exchange earnings through none of the Chinese firms operating in India have so far appointed Indian nationals as managing directors or chief of these export initiatives are supported by India's production-linked incentive (PLI) scheme. While most Chinese brands are not part of PLI, some of their contract manufacturers like Dixon are beneficiaries of the scheme.A promoter of a leading third-party manufacturing company said it has been a long time ask of the government to the Chinese companies to export from India. 'Even the rest (of Chines brands) who are yet to start (exports) will start soon,' he said, requesting need for supply chain diversion amid rising geopolitical tensions and the US tariff threat is another factor influencing this executives said the Chinese companies are also open to the idea of exporting phones and electronic products to the US from India, depending on the outcomes of bilateral trade negotiations the US is undertaking with both India and already exports Motorola smartphones to the US from Dixon emerged as India's top export category in FY25, with outbound shipments rising 55% year on year to $24.14 billion. Apple led the charge by exporting iPhones worth more than $17.4 billion, with Samsung largely accounting for the balance.
Time of India
3 hours ago
- Time of India
'Made in India' Chinese phones ring overseas
Kolkata: Chinese smartphone and electronic companies have started exporting from India to West Asia, Africa and even to the United States —markets long served almost exclusively from China and Vietnam— amid sustained government nudging and expanding local manufacturing capacities. Oppo Mobiles India for the first time earned foreign exchange of ₹272 crore in FY24 from exports, while Realme Mobile Telecommunications (India) earned ₹114 crore, according to their regulatory filings submitted to the Registrar of Companies (RoC) on May 12. The companies are yet to file their financial results for FY25. Play Video Pause Skip Backward Skip Forward Unmute Current Time 0:00 / Duration 0:00 Loaded : 0% 0:00 Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 1x Playback Rate Chapters Chapters Descriptions descriptions off , selected Captions captions settings , opens captions settings dialog captions off , selected Audio Track default , selected Picture-in-Picture Fullscreen This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Opacity Opaque Semi-Transparent Text Background Color Black White Red Green Blue Yellow Magenta Cyan Opacity Opaque Semi-Transparent Transparent Caption Area Background Color Black White Red Green Blue Yellow Magenta Cyan Opacity Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Drop shadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. One of the largest Chinese brands selling televisions and home appliances, Hisense Group, plans to start exporting locally produced goods to West Asia and Africa from early next year. Live Events This marks a notable shift in strategy for Chinese brands operating in India, which had so far focused largely on the domestic market. The change comes amid increased government scrutiny of Chinese firms after the border conflicts with China in 2020 and persistent nudging of Chinese companies. Local Partnerships Chinese companies have been told in informal forums to localise manufacturing in partnership with Indian firms, build locally owned distribution, export, and appoint Indians in senior management and boards, people familiar with the matter said. Ajay Singhania, managing director of Hisense's local manufacturing partner Epack Durable, told analysts earlier this month that the company is setting up a Rs 100-crore plant in Sri City for Hisense, which will also undertake exports. The plant will replicate the 'designs and everything done' in Hisense's China facility, he said. Lenovo Group has also lined up exports of servers and laptops from India, even as its smartphone arm Motorola already exports devices to the US. Motorola phones are manufactured by Dixon Technologies , which is now expanding its capacity by 50% to meet growing export demand, the company told analysts last month. Dixon also manufactures smartphones for Chinese firm Transsion Holdings — the maker of Itel, Tecno and Infinix brands — which has started exporting to Africa. Consumer electronics and appliances major Haier is also exploring export opportunities, industry insiders said. Smartphone brands like Oppo, Vivo, Realme, OnePlus and Xiaomi are now partnering with Indian businesses and some have started exports. RoC filings of Xiaomi, Midea and OnePlus for FY24, though, did not show foreign exchange earnings through exports. However, none of the Chinese firms operating in India have so far appointed Indian nationals as managing directors or chief executives. PLI Support Some of these export initiatives are supported by India's production-linked incentive (PLI) scheme. While most Chinese brands are not part of PLI, some of their contract manufacturers like Dixon are beneficiaries of the scheme. A promoter of a leading third-party manufacturing company said it has been a long time ask of the government to the Chinese companies to export from India. 'Even the rest (of Chines brands) who are yet to start (exports) will start soon,' he said, requesting anonymity. The need for supply chain diversion amid rising geopolitical tensions and the US tariff threat is another factor influencing this trend. Industry executives said the Chinese companies are also open to the idea of exporting phones and electronic products to the US from India, depending on the outcomes of bilateral trade negotiations the US is undertaking with both India and China. Lenovo already exports Motorola smartphones to the US from Dixon plants. Smartphones emerged as India's top export category in FY25, with outbound shipments rising 55% year on year to $24.14 billion. Apple led the charge by exporting iPhones worth more than $17.4 billion, with Samsung largely accounting for the balance.
