Karnataka, India’s southern state, proposes to reduce taxes and provide financial incentives to sustainable mobility firms, including a significant tax decrease for hybrid cars that will benefit Toyota, according to a draft state government document.
While India has concentrated on exempting electric vehicles, this decision might make Bengaluru, the IT powerhouse of the country, the second state after northern Uttar Pradesh to offer tax breaks to hybrid vehicles. Toyota has been lobbying New Delhi in support of this measure.
According to a draft seen by Reuters, Karnataka, which has the third-highest sales of electric vehicles in India, wants to drop road tax and registration fees for hybrid cars that cost less than $30,000 from their current 13% to 18%.
The state seeks to boost “clean mobility vehicle adoption,” which includes EVs, chosen hybrids, and hydrogen-powered automobiles, according to the draft, which does not provide a timeline for finalizing and unveiling the policy.
Requests for comment by Reuters was not responded to by the state’s transport department.
Rivals like Tata Motors and Mahindra & Mahindra, which saying incentives for hybrids will hurt India’s ambitions for their adoption, are at conflict with Toyota’s position.
Federal sales tax is 5% for electric automobiles and up to 43% for hybrid vehicles. State road and registration taxes are separate charges.
According to the draft, Karnataka plans offering incentives of up to 25% on capital investments made by manufacturers of electric cars or their components. These incentives would vary in size based on the amount of the investment and the number of vehicles employed.
Karnataka seems likely to provide financial incentives to firms investing in fixed assets, such land and machinery, for new factories or to expand existing ones. These incentives are expected to range from 15% to 25% of the total investment made by enterprises.
These will also apply to companies who manufacture battery components or EV charging equipment, according to the draft.
The state administration has already stated that it intends to use a clean mobility strategy to attract up to $6 billion in new investments, but it has not disclosed any more information.
In line up with Prime Minister Narendra Modi’s focus on encouraging the adoption of such cars to reduce pollution and lower the cost of fuel imports, Indian states are competing with one another in terms of investments and tax incentives to entice the EV industry.
In the fiscal year 2023–2024, India sold 4.2 million cars, of which fewer than 100,000 were hybrids and electric vehicles.
India wants to increase the percentage of new automobile sales to entirely electric vehicles to 30% by 2030.