UP fee waiver on hybrid cars: Will it lift Maruti Suzuki India sales, stock price?

The Uttar Pradesh government's decision to waive off the registration fees for strong hybrid electric vehicles and plug-in hybrid electric vehicles effective 1 July 2024 should benefit unlisted player Toyota the most, as the Japanese MNC commands more than 85 per cent market share in strong hybrids segment in India.

Maruti Suzuki India should also benefit from the announcement, given that the fee benefit would be available on the zeta+ and alpha+ variants of Grand Vitara and Invicto. The two variants, analysts said, are seen to get direct and indirect benefits of Rs 2,55,000-2,70,000 per unit, as they now enjoy waiver of registration fees of Rs 1,86,000-2,55,000 per vehicle. Toyota Hyryder, Toyota Innova Hycross and Honda City e-HEV are some other peer models, which are getting waiver on registration fees.

Nomura India said the pan India sales of Grand Vitara Strong Hybrid and Invicto stood at 1,200-1,500 units per month, and UP as a state could be 10 per cent of that. Other variants like ICE and even CNG sell more in the case of Grand Vitara due to lower cost, it noted.

"There may be a shift between the variants in UP now. One issue with CNG and hybrid vehicles is lesser boot space which limits the use case. Due to ongoing discounts, the profitability of strong hybrids is also likely to be low. 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 estimates for FY25-26F," Nomura India said.

MOFSL said the contribution of UP to total passenger vehicle (PV) industry and to Maruti Suzuki India sales mix is at 10 per cent. Additionally, for MSIL, 20-25 per cent of Grand Vitara sales (9,000 units per month) account for strong hybrids. This development is certainly positive for Maruti Suzuki India, the brokerage said.

"However, it will be interesting to see if other states follow this move. MSIL continues to be our top pick among Auto OEMs," it said.

PhillipCapital noted that there has seen slowing EV demand leading Tata Motors to reduce its estimate of FY30 car industry EV mix to 20 per cent recently. Additionally, given the CAFÉ norms & shift to BSVII in due course, it believes that Mahindra & Mahindra (M&M) would have to build a hybrid portfolio, considering its non-existence in the CNG space.

"Though it wouldn’t take other carmakers a lot to build hybrid capability, Maruti Suzuki (Maintain Buy, with target price of Rs 15,223), being the first mover, has a proven technology, along with Toyota. Hyundai Motor, along with some other OEMs have also mentioned that they will bring in hybrids to India if there would be a beneficial scenario for hybrids in India. We believe that as more OEMs launch hybrids, and the industry portfolio expands, it would give further thrust to hybrid sales," it said.