Mahindra & Mahindra Ltd., India's largest manufacturer of sport utility vehicles (SUVs), will phase out its only vehicle with hybrid technology – the Scorpio mild hybrid – after a sharp increase in the tax incidence under the new goods and services tax (GST) regime.
“Hybrid has become less attractive, and difficult to justify,” M&M's Managing Director Pawan Goenka on a conference call with journalists. The higher costs would have to be borne partly by auto manufacturers as the entire burden cannot be passed on to consumers, he added. Goenka believes that even manufacturers that had aggressive plans to launch hybrid vehicles will now re-evaluate their strategy.
Under the GST regime, which came into effect on July 1, hybrid vehicles have been put in the highest tax bracket–28 percent–and they also bear the highest cess of 15 percent. Conversely, electric vehicles are being taxed at 12 percent.
Hybrid vehicles are seen as the middle ground between petrol-, and diesel-powered engines, and those that run on electricity. With internal combustion and an electric motor, these vehicles are considered significantly more fuel efficient than the predominantly used petrol and diesel vehicles.
Hybrids range from mild hybrids, like M&M's Scorpio, to full hybrids, like Toyota's Prius, based on the strength of the electric motor, the size of the battery pack, and the extent to which the unit is used.
Goenka statement should not come as a surprise after he said in May that M&M would prioritise development of electric vehicles over hybrids. The company outlined plans to raise its production of electric vehicles to 5,000 per month by 2019. In order to do this, it will spend Rs 600-800 crore over the next three years out of its planned capital expenditure of Rs 12,000 crore in the same period.
Despite the setback on account of GST, M&M will not stop researching hybrid technology. Like many of its peers in Europe, the company is keen on developing a hybrid vehicle with a 48-volt electric motor.
“From Mahindra side, we'll continue to work on that (hybrid) technology. We will be in readiness to launch hybrid vehicles of various types, but will not launch if there is no reduction in the tax rates,” said Goenka.
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