The southern state of Karnataka has introduced a comprehensive clean mobility policy aimed at revolutionizing transportation with substantial tax incentives for hybrid vehicles and attractive benefits for electric vehicle (EV) manufacturers. This initiative, outlined in a draft government document, positions Karnataka as a key player in India’s shift towards environmentally friendly transportation options.
The proposed policy seeks to enhance the adoption of “clean mobility vehicles,” encompassing EVs, select hybrids, and hydrogen-powered vehicles. A significant highlight is the suggestion to abolish road tax and registration fees for hybrid cars priced below 2.5 million rupees (approximately USD 30,000). This represents a considerable departure from the existing tax framework, which imposes levies ranging from 13% to 18%.
Ranking third in India for EV sales, Karnataka joins Uttar Pradesh in offering tax reductions for hybrid vehicles. This move holds particular importance for automakers like Toyota, which has been advocating for such concessions from the central government. However, this perspective is met with skepticism by domestic competitors, including Tata Motors and Mahindra & Mahindra, who argue that promoting hybrids could detract from India’s ambitious EV adoption targets.
The draft policy also proposes significant financial incentives for companies investing in the clean mobility sector. Electric vehicle manufacturers, along with those producing battery components and EV charging infrastructure, could benefit from incentives of up to 25% on capital investments, contingent on the investment size and job creation.
While Karnataka’s government aims to attract up to USD 6 billion in new investments through this clean mobility initiative, this draft offers the first detailed insight into the measures being considered to reach this ambitious goal. The timing aligns with a nationwide push for electric mobility, as the Indian government targets 30% of new car sales to be fully electric by 2030. Yet, current adoption rates present challenges, with fewer than 100,000 hybrids and EVs sold out of 4.2 million car sales in the 2023/24 financial year.
Karnataka’s nuanced strategy recognizes hybrids as a potential bridge technology, facilitating the transition for both consumers and manufacturers towards full electrification. However, this inclusion has ignited debates within the automotive industry, with some advocating for hybrids as a practical step, while others worry it may hinder the adoption of fully electric vehicles.
As competition among Indian states intensifies to attract investments in the burgeoning EV sector, Karnataka’s policy creates a promising environment for both investors and manufacturers. The dual approach of tax incentives for consumers and financial support for manufacturers could foster the growth of cleaner vehicle technologies.
Currently, the state government has not set a timeline for finalizing and implementing this policy. The transport department of Karnataka has yet to respond to inquiries regarding the draft, leaving room for potential changes before the official unveiling. The final outcome could significantly impact not only Karnataka but also India’s automotive industry and its clean energy transition objectives, potentially influencing other states and national policy on clean mobility incentives.
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