Toyota Motor of Japan is asking the Indian government to slash taxes on hybrid vehicles by up to one-fifth, claiming they are significantly less polluting than petrol cars but do not receive equivalent policy treatment, according to a company letter.

The world's largest automaker intends to increase manufacturing capacity to match a boom in Indian demand for hybrids, but Prime Minister Narendra Modi's government has prioritized electric vehicle (EV) sales, granting companies millions of dollars in incentives to create EVs and batteries. In India, electric vehicles are taxed at 5%, while hybrids are taxed at 43%, barely below the 48% levied on petrol vehicles.

According to its letter to Modi's Niti Aayog think-tank, which plays a major role in policymaking, hybrids offer lower emissions and better fuel efficiency. According to the letter from Toyota's India country head, Vikram Gulati, the tax advantage over petrol automobiles should be as much as 11 percentage points for hybrids and 14 points for flex-hybrids.

According to Reuters calculations, this translates to a tax rate of 37% on hybrids and 34% on flex-hybrids, representing savings of up to 14% and 21%, respectively. "We would kindly request for proportionate policy support," Gulati wrote in the letter, which was not previously published, on September 20. Toyota, which popularized hybrid technology with the Prius, has come under fire from investors and environmental groups for continuing to back hybrids, which it claims make more sense in regions where the infrastructure is not ready for EVs.

EVs are supported by Indian automakers Tata Motors and Mahindra & Mahindra, while hybrids are supported by Toyota and Hoda Motor. Toyota declined to comment on the letter but stated that the "most optimal way" to cut carbon emissions was through a combination of electrified and alternative energy vehicles, such as EVs and hybrids.

Niti Aayog did not react to a comment request.

Toyota has begun researching EVs while also advocating for hydrogen-powered vehicles, claiming that a "multi-pathway" approach is required to address the climate challenge The tax system in India, along with the usage of normally more expensive powertrain components such as engines and electrified parts like as batteries and motors, makes hybrid production "30%-350% more expensive than its petrol counterparts," according to Toyota. Toyota also begs India in its letter to include hybrid cars in a government incentive programme that offers purchasers discounts, a policy that is currently only available for EVs.