Toyota lobbies India to cut hybrid-car taxes

Toyota is lobbying the Indian government to cut taxes on hybrid vehicles by as much as one-fifth, arguing they are far less polluting than petrol cars but do not get commensurate policy treatment, a company letter shows.

The world's largest carmaker plans to expand production capacity to meet a surge in Indian demand for hybrids, but Prime Minister Narendra Modi's government has focused on pushing sales of electric vehicles (EVs), offering companies millions of dollars in incentives to build EVs and batteries.

India taxes EVs at just five per cent, while the levy on hybrids is as high as 43 per cent, just below the 48 per cent imposed on petrol cars.

Toyota argues the five per cent point differential favouring hybrids over petrol cars is "insufficient", given the reduced emissions and better fuel consumption hybrids offer, according to its letter to Modi's Niti Aayog think-tank, which plays a key role in policymaking.

The tax differential over petrol cars should be as much as 11 percentage points for hybrids and 14 points for flex-hybrids, says the letter from Toyota's India country head, Vikram Gulati.

That amounts to a tax rate of 37 per cent on hybrids and 34 per cent on flex-hybrids, cuts of as much as 14 per cent and 21 per cent, respectively.