There has been a long-drawn debate on whether to include hybrid cars under the Faster Adoption and Manufacturing of Electric Vehicles policy (FAME III). The ball began to roll earlier this year when Union Minister for Road Transport and Highways, Nitin Gadkari, said that he plans to send a proposal to the Finance Ministry to reduce the GST on hybrid cars to five per cent and flex-fuel engines to 12 per cent. The proposal had now cascaded into Uttar Pradesh, the country’s second-largest state, deciding to wave the registration tax on hybrid vehicles which are under FAME II. So, what can hybrid car manufacturers expect from the upcoming 2024 Budget? We delve into what benefits hybrid cars could get and how will that affect the electric vehicles segment.
Will hybrid cars receive GST cut?
The Uttar Pradesh government’s decision to scrap the registration tax on hybrid vehicles has created a significant impact on the automotive industry. Leading hybrid vehicle manufacturers like Toyota and Maruti Suzuki have welcomed this move, while Hyundai, Tata Motors, and Mahindra have expressed concerns. The UP Government clarified that only vehicles under the FAME II scheme are eligible for this waiver, meaning they must be priced under ₹20 lakh. This includes models like the Toyota Hyryder, Maruti Suzuki Grand Vitara, and Honda City Hybrid.
The Finance Ministry is considering a proposal to reduce the GST on hybrid vehicles to 5% and remove the additional 15% cess currently applied to the 28% GST. Currently, hybrid vehicles are taxed at 43 per cent GST, while internal combustion engine vehicles are taxed at 48 per cent..
Worry for electric vehicle manufacturers
The Vahan report for June 2024 indicates a downturn in the electric vehicle (EV) market. Sales dropped from 7,887 units in May 2024 to 6,888 units in June 2024. Tata Motors, the leading EV manufacturer, experienced a 17% decline, while Mahindra saw a 23% decrease. Overall, the EV market faced a 12.7% month-on-month slump. With a market share of just 2%, EV manufacturers are under pressure from the rising demand for hybrid vehicles. Jato Dynamics predicts that the hybrid segment will capture around 2% of the market.
