Tax on Automobiles Must be Tech Agnostic, Focus on Reducing Fossil Fuel Use, decarbonisation: TKM

Taxation of automobiles must be based on national goals of reducing fossil fuel consumption, decarbonisation and 'Make in India', and incentives must not be reserved only for a specific technology, according to Toyota Kirloskar Motor Executive Vice President & Country Head Vikram Gulati.

Toyota Kirloskar Motor (TKM), which on Wednesday launched its new version of the sedan Camry hybrid priced at Rs 48 lakh, believes that hybrid technology has a role to play in India's move towards electrification and it, along with other technologies that will help meet the national goals, must be considered for tax incentives in a proportionate manner, he told PTI here in an interview.

"We would like to see the government focus its policies towards our national goals, and in automotive our national goals are clearly built on reducing fossil fuel consumption, decarbonisation and Make in India. Towards that technology should be a side track," he said.

Gulati was responding to a query on whether hybrid vehicles must be incentivised with lower taxes, currently reserved only for fully electric vehicles and hydrogen fuel cell vehicles at 5 per cent and 12 per cent GST, respectively.

Internal combustion engine (ICE) vehicles are currently taxed at 28 per cent GST with different cess ranging from 1 per cent to 22 per cent depending on vehicle type.

Acknowledging the government's policies to drive a sustainable future, he cited examples of how alternate fuels such as biofuel, ethanol or compressed biogas are being promoted.

"Suffice it to say, as we evolve, and this is a very, fast-evolving environment, there always remain areas that need to be relooked, need to be brought in the current context, and taxation happens to be one of those areas," Gulati said when asked if the current system of taxes on automobiles needs a fresh approach.

He further said India also needs to have a look at how other countries in the world have gone about taxation of vehicles based on carbon emission citing the example of Europe "where 22 out of 27 countries have a taxation system based on carbon emissions, which is a mirror image of fossil fuel consumption".

Also, he said Brazil is now moving into policies which are looking at carbon emission from a well-to-wheel perspective.

In the Indian context, Gulati said, "To call ourselves zero-emission vehicles would only be true if our footprint extends beyond the tailpipe and covers the energy. I'm afraid today we are very, very far away from that, particularly for BEVs (battery electric vehicles) given the fact that our energy generation is still preponderantly fossil fuel that is coal-dependent." He, however, said India is "going in the right direction and soon after seven-eight years this shift is going to happen".

When asked about companies like Tata Motors and Mahindra & Mahindra opposing incentives for hybrid vehicles, Gulati defended the hybrids saying being the mother technology it has enabled "other electrified technologies to come in in meaningful terms" and by virtue of improving fuel efficiency of internal combustion engine vehicles, it is playing a role in reducing fossil fuel consumption.

Refuting the notion that hybrids will come in the way of electric vehicles, he said, "Why this is a wrong notion is because just look at the market -- 95 per cent of the market remains petrol and diesel. So am I to believe that a 2 per cent EV is finding it suffocating in a scenario when 95 per cent of the market is unaddressed and needs to be addressed? "I don't think hybrids, in any way, hamper the growth of electrics (EVs). It is actually the opposite."

Asked if hybrid vehicles deserve tax incentives, Gulati said,"I think it's not just about hybrids. Today, technology is only a means to achieving the end...you shouldn't be concerned about technology. You should be supporting all of those technologies in a proportionate manner, to the extent they deliver on societal goals."

Asserting that it should not be a "technology fight", he said the primary objective of combating climate change must be kept in mind keeping in mind the plight of future generations.

As far as India is concerned, he said other factors that need to be considered while devising policies are how to drive the country's economic growth, Make in India, localisation and self-reliance, among others.

As for the Camry hybrid, TKM Vice President, Sales-Service-Used Car Business Sabari Manohar said the company believes that there is a niche segment of consumers who still prefer sedans and that segment needs to be addressed.

TKM has sold a total of 17,900 units of the Camry since it was launched in India in 2002 as a fully imported unit with a petrol engine and later in 2013, the hybrid version was introduced.