Registration fee waiver in UP to spur hybrid car sales? What Nomura says

Nomura on tax cut on Hybrid in UP: Analysts at Nomura, a Japan-based brokerage firm, said that the recent tax cuts on hybrid vehicles in Uttar Pradesh (UP) may increase accessibility to hybrid models but are unlikely to have a larger impact.

“Even if there is a sharp jump in the sales of strong hybrids in UP, given the low base till Oct-25, we do not see any significant impact on our industry estimates for FY25- 26F,” Nomura said in a note.

Toyota, with its dominant market share in strong hybrids in India, analysts said, is anticipated to be a primary beneficiary of this policy change, followed by Maruti Suzuki (MSIL). 

MSIL's eligible models, the Grand Vitara Strong Hybrid and Invicto, typically sell between 1,200 to 1,500 units nationwide per month, with UP constituting about 10 per cent of these sales, analysts said.

Despite the positive demand outlook for strong hybrids in UP, Nomura expects any broader impact on the hybrid car market in India to be minimal. 

“We maintain our base case of ‘no change in hybrid car taxation’ by the Central government. The India government has set a long-term target EV penetration of 30 per cent by 2030 versus the current penetration of approximately 2 per cent. In our view, the government will continue to support EVs, similar to the multiple schemes it has introduced to incentivise the electric vehicles (EVs) ecosystem (auto PLI, battery PLI, EV import policy, lower road taxes),” Nomura said.

Additionally, car registration and road tax rates for internal combustion engine (ICE) vehicles range from 5 per cent to 20 per cent across different states in India, depending on factors such as vehicle price and fuel type. 

These taxes, analysts highlighted, are decided independently by each state government, making it uncertain whether other states will also offer tax subsidies for strong hybrids. 

Thus, Nomura analysts caution against assuming that this policy change in Uttar Pradesh will prompt similar actions in other states.

Jump in sales?

The move, analysts believe, specifically benefits models like the Grand Vitara Strong Hybrid and Invicto. However, hybrids other than strong and plug-in hybrids do not qualify for this benefit.

“We believe these benefits along with the discounts (like Rs 50,000 cash discount for July-24 on MSIL’s Grand Vitara) will make hybrid vehicles more accessible. Some of the dealerships in the UP highlighted after the fee waive-off that there is a sudden increase in the number of queries for hybrid models, and they are receiving approximately 10-15 booking requests per day,” Nomura said.

As per a sales executive at a MSIL dealership in UP, the fee benefit is available on the zeta+ and alpha+ variants for Grand Vitara and Invicto. Meanwhile, the total direct and indirect benefits are Rs 2,55,000-2,70,000 on both the variants. These models now enjoy a waiver of registration fee of Rs 1,86,000-2,55,000. The effective impact on the road price is now approximately Rs 1.92 million/Rs 2.73 million.

That apart, according to reports, the waiver of registration fees for strong hybrid electric vehicles and plug-in hybrids in UP, effective July 1, 2024, has led to a notable reduction in on-road prices, up to Rs 400,000 in some cases.