Hybrid Cars May Become A Thing Of The Past Because Of GST

The country has just witnessed the opening of a new chapter in the economy with a new taxation scheme, the Goods and Service Tax (GST) replacing a cluster of existing taxes.  The new uniform tax structure has many key financial takeaways for the country's auto sector. The automobile sector too wasted no time in passing the GST benefit to the consumer by announcing price cuts.

However, there is one particular segment of the Indian passenger vehicle market which may become a thing of the past due to GST. The rate of tax levied on hybrid vehicles under the GST has made it expensive by lakhs and consumers may opt for non-hybrid vehicles where there is a significant price cut.

The government is taxing the hybrid vehicles at a rate as high as 43 per cent under the GST tax regime set which is significantly higher than the just abolished tax of about 29 per cent of such cars.

As result prices of many bestselling cars saw a rise of up to Rs 5 Lakhs. On the contrary, leading carmakers have announced a price cut of up to 3 per cent across their lineup.

Maruti Suzuki hiked the price of its hybrid Ciaz and Ertiga models by up to Rs 1 lakh. Ciaz is the best-selling sedan in the segment and a price hike is expected to dent its demand. R C Bhargava, chairman of Maruti Suzuki had earlier said that if the tax is not reconsidered it will essentially make all hybrid cars unviable.

"It would drive hybrids out of the market," he said.

Toyota Kirloskar Motor which makes the popular Camry Hybrid and Prius will see a price hike of up to Rs 5 lakh. However, the price hike will differ from state to state. Leading SUV maker Mahindra may hike the price of Scorpio Intelligent Hybrid by more than Rs 1 lakh.
Abdul Majeed, Partner at PwC said, "The price rise will definitely dent the demand for these cars."

Companies invested in hybrid technology may bear financial burden due to the increased rate of tax as many Japanese automobile makers have invested heavily into hybrid cars in India in recent past.

Hybrid luxury cars would become more expensive than ever due to additional taxes it will have to pay. The BMW i8 would see a mammoth increase of price by nearly Rs 45 lakh while the Volvo XC 90 Hybrid would cost nearly Rs 17 lakh more than it does now.  

According to Ministry of Heavy Industries & Public Enterprises, 73,633 mild hybrid four-wheelers were sold between April 1, 2015, to February 28, 2017, under the FAME (Faster Adoption and Manufacturing of [hybrid &] Electric vehicles in India) scheme.