In a boost for Toyota, Indian state cuts levies on hybrid cars

A move by India's Uttar Pradesh state to waive some levies on hybrid cars will make them 10% cheaper, delivering Japan's Toyota Motor a big win in lobbying efforts and raising industry and analyst expectations that other states could follow suit.

Just as it does with electric cars, the government of India's most populous state will also waive the registration tax on some hybrid car sales, it said in a July 5 notification.

Hybrid cars offer fuel savings as they operate on both electric motors and combustion engines.

Shares of Maruti Suzuki, India's top carmaker which produces and sells hybrid cars in partnership with Toyota, have surged 5.5% since local media reported on the state's notification for the first time this week.

"This is a sizeable incentive provided by a state for hybrid cars. Uttar Pradesh's move could encourage other states to follow," Morgan Stanley said in a note, adding that with more hybrid models to come, their share of total sales will rise.

Uttar Pradesh accounts for 10% of India's total car sales.

Toyota, which holds an 85% share of India's 'strong' hybrid car market with its fast-selling Hycross and Hyryder SUVs, is "likely to be a key beneficiary of this move, followed by Maruti Suzuki," Nomura said in a note.

Toyota and Maruti Suzuki did not respond to Reuters queries.

The state's levy exemptions apply to so-called strong hybrids, which can run on electric motors for a while, and to plug-in hybrids.

Strong hybrid models made up less than 3%, or about 28,000 units, of India's total car sales of 1 million in January-March this year, while EVs made up nearly 4%, according to Nomura.

Indian Prime Minister Narendra Modi's government has focused its green mobility push on electric vehicles, offering companies