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Synopsis: The Uttar Pradesh government's waiver of registration fees for hybrid cars is set to boost Maruti Suzuki India's sales, particularly for their Grand Vitara and Invicto models. However, the primary beneficiary will be Toyota, which dominates the hybrid market in India. Analysts predict only a modest impact on Maruti's overall sales and stock price despite the benefits.
The Uttar Pradesh government has announced a waiver on registration fees for strong hybrid electric vehicles (HEVs) and plug-in hybrid electric vehicles (PHEVs), effective from July 1, 2024. This move is expected to benefit several car manufacturers, with Toyota standing out as the primary beneficiary due to its commanding market share of over 85% in India's strong hybrid segment.
Impact on Maruti Suzuki India
Maruti Suzuki India, another significant player in the hybrid market, is also poised to benefit from this announcement. The waiver applies to the zeta+ and alpha+ variants of the Grand Vitara and Invicto models, which are expected to receive direct and indirect benefits ranging from Rs 2,55,000 to Rs 2,70,000 per unit. This includes a registration fee waiver between Rs 1,86,000 and Rs 2,55,000 per vehicle. Other models like the Toyota Hyryder, Toyota Innova Hycross, and Honda City e-HEV will also enjoy similar waivers.
Nomura India estimates that the nationwide sales of Maruti's Grand Vitara Strong Hybrid and Invicto are between 1,200 and 1,500 units per month. Uttar Pradesh could account for about 10% of these sales. Although other variants, such as internal combustion engine (ICE) and compressed natural gas (CNG) versions, currently outsell the hybrids due to their lower costs, the fee waiver could shift consumer preference towards the hybrid models in Uttar Pradesh.
Analyst Perspectives
Despite the potential increase in sales, analysts from Nomura India caution that the overall impact on Maruti Suzuki's financial performance may be limited. They note that hybrid and CNG vehicles suffer from reduced boot space, limiting their utility. Moreover, ongoing discounts could further compress the profitability of strong hybrids. Consequently, even a significant rise in hybrid sales in Uttar Pradesh is unlikely to substantially affect Maruti's earnings estimates for FY25-26F.
MOFSL highlights that Uttar Pradesh contributes 10% to the total passenger vehicle industry and Maruti Suzuki India's sales mix. Additionally, strong hybrids constitute 20-25% of the Grand Vitara's monthly sales, totaling around 9,000 units. Therefore, while the development is positive, its impact on the company's overall performance may be modest.
Disclaimer: The information provided in this article is for informational purposes only and should not be construed as financial advice. Please consult a financial advisor before making any investment decisions.
