GST derails hybrid car sales in India
Hybrid cars are attracting 43% duty under GST, while electric vehicles are being taxed at 12%
Mumbai: Sale of hybrid cars in India saw a sharp decline in the three months to September over the year-ago period, said executives at auto firms as prices of these models have gone up under the goods and services tax (GST) regime implemented on 1 July. Hybrid cars are attracting 43% duty under GST, while electric vehicles (EVs) are being taxed at 12%.
Maruti Suzuki India Ltd, India’s largest passenger carmaker, lost favour for the hybrid variants of its premium sedan Ciaz and multi-utility vehicle (MUV) Ertiga in the quarter gone by, said chief financial officer Ajay Seth, during an analyst conference call on Friday.
Owning to high taxation, Maruti had to increase prices of both the models by about Rs80,000. The hybrid variant of the Ciaz contributed 32% of total Ciaz sales for the September quarter compared to 70% a year ago, said Seth. The impact of the price hike, however, was not as pronounced for Ertiga, whose hybrid variant sales came down to 50% from 70% in the same period, he added. Seth did not indicate if the company would pare down production of its hybrid models.
Other carmakers too saw sales of hybrid models getting dented. Toyota Kirloskar Motor (TKM) has cut down production of its Camry sedan hybrid as demand for the model has been adversely impacted due to the GST, Shekar Viswanathan, vice-chairman, Toyota Kirloskar Motor, told PTI on 24 October.
Toyota Camry hybrid sales in the September quarter dropped to 87 units, down 73% from 323 units a year ago, N. Raja, director and senior vice-president, sales and marketing, said in an email response. He attributed it to the price increase the company had to go for due to higher taxation. He said the company hopes to see an uptick in consumer demand after witnessing a positive movement in September since there was no hike in the cess for hybrids. After the price hike, the price of the Camry hybrid has gone up to Rs45 lakh from Rs41 lakh. An executive at a Toyota dealership said, on the condition of anonymity, that the GST has deterred customers from opting for hybrids.
Mahindra & Mahindra Ltd that sells the Scorpio hybrid too plans to limit the production of the model and refrain from launching more hybrids since the 43% GST rate has made production unviable, Pawan Goenka told reporters on a conference call on 6 July. A Mahindra spokesperson didn’t respond to an email sent on 30 October.
Analysts said hybrids could have offered the logical stepping stone towards the green technology. The government plans to make India an all-electric vehicle market. “Hybrids are a great tool to drive consumer acceptance towards the EV technology, which the government ultimately wants to promote. Lower fuel spending on hybrids can also make consumers see similar value in EVs,” said Anil Sharma, principal analyst at market research firm IHS Markit.
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