EV boost: Hyundai, Tata, Kia write to UP government on offering incentives of up to Rs 1 lakh on EVs

Top car manufacturers have written to the Uttar Pradesh government not to offer incentives for hybrid cars, stating that the move would hit targets on adopting electric cars and investment plans. Hyundai, Kia Motors, Tata and Mahindra have sent separate letters to the Uttar Pradesh government highlighting how upfront incentives would hit their targets and benefiting rivals such as Maruti and Toyota, Reuters reported on Thursday.

In July, the Uttar Pradesh govt released a notification outlining lucrative incentives for the adoption of electric vehicles. The scheme offers a 15% incentive, with a maximum cap of Rs 1 lakh, for the purchase of 25,000 electric cars.

Additionally, a fund of Rs 100 crore has been assigned to support the acquisition of 200,000 two-wheelers, with a subsidy of either Rs 12,000 or 15% of the vehicle's cost for 30,000 three-wheelers. This subsidy program is in effect until 2027 or until the allocated funds are depleted, whichever comes first.

This was a major boost for auto major Toyota, which alone accounts for 10% of India's car sales. The waiver issued by the Uttar Pradesh government made the EVs 10% cheaper and resulting in savings of up to $5,200 on a Toyota Camry hybrid sedan, for instance.

Hyundai, which is gearing up for a $3 billion Indian IPO, said in a July 12 letter that the move would "derail" electrification of transport, while Kia said promoting hybrid vehicles would negatively impact widespread EV adoption.

Mahindra's letter flagged concerns about disruption to the EV market.

Tata, which raised $1 billion from private equity firm TPG in 2021 for its EV business, said in its July 11 letter that favouring hybrids put at risk the industry's $9 billion committed for developing EVs. It added this investment was the result of a "clear focus" on the sector by Prime Minister Narendra Modi's government.

Hyundai, Kia, Tata and Mahindra & Mahindra have not publicly commented on Uttar Pradesh's move. Business Today could not verify the report independently.

Vijay Kumar, an Uttar Pradesh transport official, told Reuters the state government was reviewing objections received from some companies and that no decision had been taken. An industry meeting will be held on August 11.

The UP government notification stated that incentives will be provided for the purchase of electric vehicles. Specifically, 30,000 electric three-wheelers will be eligible for incentives. The incentive amount will be 15% of the ex-factory price or Rs 12,000 per vehicle, whichever is lower. The state has allocated a budget of Rs 36 crore for this initiative.

Furthermore, the government aims to subsidize the purchase of 400 electric buses through this scheme. Incentives of Rs 20 lakh per bus will be extended for this purpose. Additionally, incentives will also be provided for 1000 electric goods carriers. The incentive for each electric goods carrier is capped at Rs 100,000 or 10% of the ex-factory price, whichever is lower.

India registered 4.2 million car sales in its 2023-24 financial year, with hybrids and EVs accounting for fewer than 100,000 sales each.

Uttar Pradesh's tax move has triggered concerns among EV players that other states could follow suit, executives say.

Hybrid proponents, however, say there is not enough charging infrastructure for EVs in India and hybrids - which use both a battery and combustion engine - should be promoted as they are less polluting than fossil fuel-only cars.