New Delhi: With Indian OEMs (Original Equipment Manufacturers) investing in multiple fuel technologies, the underlying goal remains the same: to create a sustainable ecosystem. The transition from Internal Combustion Engine (ICE) vehicles to electric vehicles (EVs), CNG, or other fuel technologies is complex. Hybrid technology can act as a transitional solution, according to an EY-P report.
Hybrid EVs offer a bridge for consumers hesitant to fully transition to EVs due to concerns such as range anxiety, charging infrastructure, and cost. This technology provides better range and convenience than current EVs while emitting fewer pollutants than ICE vehicles.
In its recent report, The Future of Hybrid Electric Vehicles in India, EY-P highlighted the challenges and solutions for hybrid technology adoption in India, along with a global perspective.
Barriers to hybrid technology adoption
To comply with upcoming stringent emission norms like CAFÉ III and BS VII, OEMs will need to adopt a mix of propulsion technologies. However, the future of hybrids in India remains uncertain due to policy constraints. The Indian Hybrid Vehicle Policy places hybrids under a 28% GST slab, compared to just 5% for EVs, making hybrids less financially attractive.
The Indian automotive sector is expected to grow at a CAGR of 6% from FY25 to FY30, reaching 5.75 million units. The UV1 segment in passenger vehicles (PVs) is well-positioned for hybrid adoption, as buyers often prefer these vehicles for long-distance travel.
However, challenges such as limited charging infrastructure, range anxiety, and high upfront costs leave buyers hesitant, according to the EY report.
In terms of Total Cost of Ownership (TCO), hybrid EVs in the UV1 segment are 26% more expensive than petrol cars. However, compared to EVs in the same segment, hybrid vehicles are only 9% more expensive than petrol vehicles in terms of TCO. Toyota’s Hycross hybrid remains one of the most popular hybrid models, with the UV3 segment emerging as the largest adopter of hybrid vehicles in CY24.
Government’s increased focus on hybrid technology adoption
“If tax reforms for hybrid vehicles in India are introduced and the GST rate is reduced to the same level as EVs, hybrid EVs could achieve TCO parity with petrol vehicles,” the report stated. Reducing the GST on hybrids could promote their adoption, serving as a transitional step toward full EV adoption as India’s infrastructure evolves.This also presents an opportunity to boost domestic EV component manufacturing, enhance EV infrastructure, and create a sustainable transition period across the EV value chain. However, a comprehensive shift to hybrids will take longer than FY31 to complete, the report concluded.
Global leaders in hybrid technology
Hybrid EV technology gained traction during the U.S. gas crisis in the 1960s. However, Japanese auto giants like Honda and Toyota were instrumental in bringing hybrids to the mass market. Hybrid Electric Vehicles (HEVs) have also gained attention from global EV rivals:
- United States (US): HEVs and plug-in hybrids account for 13% of new car sales, with 1.9 million vehicles sold last year.
- Europe: In the past year, HEVs and plug-in hybrids made up over one-third of all new car registrations, while Battery Electric Vehicles (BEVs) accounted for just 14% of all vehicle sales.
- China: HEVs and plug-in hybrids comprised 16% of new vehicle sales, though BEVs lead the market with a 27% share of total sales.
