India's Largest State Just Made Hybrid Cars More Expensive

Road tax relief for hybrid cars withdrawn in Rajasthan

Rajasthan has ended its 25 percent road tax exemption on strong hybrid vehicles, effective immediately. The exemption had been in place since February 2023.

Buyers of hybrid cars from Toyota, Maruti Suzuki, and Honda will now pay higher on-road prices, with the increase ranging between Rs 70,000 and Rs 1 lakh depending on the model.

The Toyota Camry Hybrid, for example, will see an on-road hike of about Rs 1.19 lakh. Models like the Toyota Hyryder, Maruti Suzuki Grand Vitara, and Honda City e:HEV will also be affected.

Impact on hybrid car buyers

The change hits popular mid-size SUVs like the Grand Vitara and Hyryder, where the additional cost makes them less competitive against regular petrol and diesel versions.

Entry-level hybrid buyers can expect a price rise of about Rs 70,000, while premium hybrids such as the Camry and Hycross face closer to Rs 1 lakh. The road tax in Rajasthan is calculated as a percentage of ex-showroom price, usually 8–10 percent for cars priced above Rs 10 lakh. The earlier exemption had made hybrids more accessible, but that benefit is now gone.

Why the exemption was rolled back

Industry watchers link the move to Rajasthan’s poor ranking in NITI Aayog’s India Electric Mobility Index 2024, where the state was placed in the lowest “Aspirant” category.

The index measures EV adoption, charging network growth, and policy support, and does not give weight to hybrid vehicles. Removing incentives for hybrids and focusing on pure EVs may be Rajasthan’s attempt to improve its standing in future rankings. The state also gains immediate revenue from higher tax collections, adding to the reasons behind the policy reversal.

How other states are approaching hybrids

The decision contrasts with other states. Uttar Pradesh currently offers a full road tax waiver for strong hybrids, giving buyers a major price advantage there. Delhi has proposed similar benefits for hybrids under its upcoming EV Policy 2.0.

The mixed approach across states creates uneven market conditions. Buyers in Rajasthan will now pay more, while neighbouring states may continue to promote hybrids through tax breaks. This difference could push some buyers to register their cars outside Rajasthan.

Effect on manufacturers and buyers

Toyota, which accounts for most of India’s strong hybrid sales through the Camry, Hycross, and Hyryder, will be hit hardest. Maruti Suzuki and Honda also lose the edge they gained through lower road taxes in Rajasthan.

Dealers may need to offer extra discounts or finance schemes to soften the impact, but sustaining such measures could be difficult. Some buyers may delay purchases, opt for petrol versions, or even look at registering vehicles in other states. Fleet operators and taxi buyers, who look closely at long-term running costs, could also shift away from hybrids in Rajasthan.

What this means going forward

For consumers, hybrids in Rajasthan are now more expensive overnight, erasing the advantage they had for nearly two years. The higher prices may slow adoption at a time when hybrids were gaining traction as a fuel-efficient option.

For manufacturers, the move underlines how state-level policies can quickly change the economics of vehicle ownership. It also highlights the broader policy divide: some states see hybrids as a stepping stone, while others like Rajasthan want to push directly toward full electrification.