The government’s decision to tax hybrid vehicles at the highest rate under Goods and Services Tax has failed to dent Toyota’s hybrid strategy for India. The Japanese carmaker, which was forced to raise prices of its hybrid vehicles, admits higher tax will hurt its sales but believes such vehicles are key to reducing overall pollution.
“For the time being we have a strong belief that hybrid is the most practical solution for reducing the fuel consumption and curbing pollution because they don’t need charging infrastructure. We understand higher tax will be a difficulty but we will still continue to focus on hybrid vehicles,” Akitoshi Takemura, senior vice president, Toyota Kirloskar Motor, told Autocar India.
Under the new tax structure, both full and mild hybrids are subject to a 12.7 percent hike in effective tax rate bringing the overall tax rate to over 30 percent. As a result, the prices of the hybrid Prius and Camry (both full hybrids), were hiked by Rs 5.24 lakh and Rs 5.1 lakh, respectively.
The hybrid Camry accounted for over 90 percent of total Camry sales since its launch. In fact, Takemura pointed out that such was the demand for the hybrid variant that the carmaker hasn’t produced a single petrol Camry since last October. However, he admits the significant hike in prices would have a negative impact on sales.
“Our hybrid vehicle sales will definitely go down. This is because, even though our Camry hybrid customers were paying Rs 33-35 lakh for the vehicle, they are price sensitive. So if prices of petrol and diesel vehicles go down while those of hybrids go up, there will definitely be an impact,” Takemura said.