Maruti Suzuki chairman R C Bhargava at a press conference in New Delhi. Photo: AFP
Maruti Suzuki chairman R C Bhargava at a press conference in New Delhi. Photo: AFP

After lackluster festival-season sales, Indian carmakers are in for another rough ride. In a push to promote electric vehicles, the government is planning to impose a tax on new cars powered by gasoline or diesel.

Using the “polluter pays” principle, the government wants to impose a tax of 12,000 rupees (US$170) on those buying gasoline and diesel cars, while providing incentives to electric-vehicle buyers.

This tax will be used to subsidize electric two-wheelers, three-wheelers and cars.

While the new policy, proposed by planning body NITI Ayog, awaits ministerial clearance, R C Bhargava, the chairman of Maruti Suzuki, the country’s largest car manufacturer with more than 50% market share, said the tax would not serve its purpose.

He said that while electric cars continue to be expensive, the proposed tax will have an impact on sales of small cars and the lower-middle-class people who buy them. The subsidies for electric cars will go to well-to-do people, Business Standard reported him as saying.

Bhargava also asked why only cars should be subjected to a tax, known in India as a cess, to promote electric vehicles. He pointed out that two-wheelers consume two-thirds of the country’s gasoline and they should not be left out in the electrification drive.

When asked about Maruti Suzuki’s plans for electric vehicles, he said the first electric car would roll out in 2020. One of the company’s popular models, the Wagon R, is now undergoing trials and will be launched in 2020.

As for the electric-car market in India, Mahindra & Mahindra has a first-mover advantage and the company plans to make 60,000 electric vehicles annually from 2020. The Indian unit of South Korea’s Hyundai Motor Co is expected to launch its electric vehicle in 2019.

Tata Motors has developed the technology. Many two-wheeler firms have also invested in developing electric products.

At the end of the 2016-17 fiscal year, the electric-vehicle market in India was about 25,000 units. Of the total number of electric vehicles sold, nearly 92% were two-wheelers, while electric cars and other four-wheelers accounted for less than 8% of total sales.

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