Japan’s Toyota Motor (7203.T) 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. The world’s most extensive carmaker plans to expand production capacity to meet a surge in Indian demand for hybrids, which combine a gasoline engine with an electric motor to reduce emissions and fuel consumption. Still, India only taxes the technology at 5%, compared to 43% imposed on petrol vehicles.
The company’s letter, seen by Reuters, says the current 5-point differential between hybrids and petrol cars is “inadequate,” given their reduced emissions and fuel efficiency. According to Reuters calculations, it calls on the government to increase the tax cut to at least 14% for hybrids and 21% for flex-hybrids, which would make them competitive with pure electric vehicles.
Despite its early leadership in hybrids, Toyota has struggled to compete with Tesla and other makers that have gone all-in on battery electric cars. This has opened the door for China’s BYD, which has won a growing global following for its well-designed and affordable all-electric models. The company has signaled to shift its focus to fully electric vehicles over the next decade.
Toyota’s strategy is that fuel cell and all-electric vehicles are still the long-term future, while hybrids can help curb emissions in the short term. It also argues that efficiency standards should be informed by what technology can realistically deliver to keep costs down and consumers interested in the vehicles.
However, Toyota has said it will push too hard on EVs once charging stations are more widely available. It also argues that there needs to be more lithium, cobalt, and nickel, the raw materials needed to produce electric vehicle batteries, to reach the scale required by some of the most ambitious 2030 EV targets.
Toyota, based in Tokyo but operates globally, has said it will invest more than $1 billion in a new plant in Bidadi, India, to start producing lithium-ion battery cells for EVs and hybrids. It will use this facility to supply other plants in Asia and South America and export the technology back to Japan, which uses hybrids like its Prius model.
The company has also teamed up with an Indian company to build the country’s first large-scale production line of hydrogen fuel cell technology, a clean-burning alternative to traditional diesel and gasoline engines. It is working on a project to produce 135,000 units a year with the help of an investment of about $1.5 billion from the state-owned Indian Oil and Gas Corp (IOGC.NS). This is part of the government’s effort to promote the production and use of alternative fuels to boost India’s energy security. The project is expected to be completed in 2023. The facility will employ about 6,000 people.