Maruti, Toyota board a UP tax waiver to sell more affordable hybrids

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₹3 lakh in the northern state, receiving a tax break that only electric vehicles in the state have enjoyed so far. Shares of Maruti Suzki India Ltd closed 6.6% higher on the BSE on Tuesday, while the BSE Auto index rose 2.17%. The UP government on 5 July said it will now fully implement its 2022 policy which waives road tax for EVs and strong and plug-in hybrids.

Though EVs have received a road tax waiver in UP from 2022, technical snags and mismatches had prevented its extension to hybrids so far. For hybrid makers whose requests for lower goods and services tax and compensation cess have gone unheard, the Yogi Adityanath-led government's move spells good news; however, it may raise concerns for EV makers who say tax sops must be limited to battery EVs such as Tata Nexon EV and the Mahindra XUV400 EV. Cheaper hybrids may also take a toll on the sales of petrol and diesel-powered vehicles in the state.

Noida and Ghaziabad in UP are part of the National Capital Region (NCR), which also includes Delhi. “The consequence of this move will be that IC engine sales, specifically that of diesel, will be reduced, with the government effort focussed on converting them to clean hybrid or EV technologies as much as possible. We see this move impacting IC engine sales, not EVs.

More attractive pricing for hybrids as a result of the tax waiver is only necessary to offset the cost disadvantage which hybrids currently face. It remains uncertain whether other state governments will follow", a senior executive at a leading passenger vehicle maker said on the condition of anonymity. Separately, Tata Motors and Mahindra & Mahindra on Tuesday cut prices of their premium SUVs by up to ₹1.4 lakh and ₹2.2 lakh respectively.