Hybrids vs Electric vehicles battle to hot up in India's car market

The strong hybrids offer a great solution over pure EVs, as they take care of all the barriers of the pure EVs, maintain Japanese carmakers

There is nothing ‘mild’ about hybrids anymore. Hyderabad-based Unmesh Chalapally (29), working for a US-based KPO (knowledge process outsourcing), had almost made up his mind to go for the latest Tata Nexon EV as his first car, until he heard of two 'strong' hybrid launches.

“I’m going to withdraw my booking amount and wait till September when both Toyota Hyryder and Grand Vitara announce their prices. As with strong hybrids, the range anxiety and overall driving dynamics of speed and terrain preparedness are gone,” says the techie.

Chalapally is right. Maruti introduced the mild hybrid technology first in the Ciaz in 2015, but it didn’t find favour with consumers. This is unlike the new Grand Vitara. In less than a week of its unveiling, Maruti has got 15,000 bookings. Of this, 55 per cent are for the strong hybrid variant.

Shashank Srivastava, senior executive director of sales at Maruti says, “Hybrids with all their merits can be a good solution for the interim till the EV ecosystem develops. Moreover, the slow pace of EV adoption in the car market means it’s only logical to have multiple powertrain options.”

Srivastava adds that the preference for strong hybrids will mark a shift in consumer behaviour in the passenger car market from an electric vehicle (EV) to a hybrid. These hybrids can also run in pure EV mode with great fuel efficiency.

While a full or strong hybrid can drive on battery power alone for 62 per cent of its uptime, a mild hybrid cannot drive solely on pure battery owing to its low voltage battery. Therefore, it delivers considerably fewer benefits than a full hybrid.

Honda Cars India’s recently launched City hybrid is booked out for 10 months, said Kunal Behl, vice-president, marketing and sales.

At a price of Rs 19.53 lakh, Honda doesn’t expect it to be a volume spinner and hopes it to be 10 per cent of City sales. On average, the City sells 3,000 units a month.

Like the Haryana government, which has recently doled out attractive sops for hybrids in its recently-announced EV policy, Behl expects some of the other state governments to follow suit.

According to the new policy, EVs that are priced up to Rs 70 lakh will get a discount of 15 per cent and hybrid vehicles priced below Rs 40 lakh will get a maximum discount of Rs 3 lakh.

Effectively, the Honda City hybrid and the Tata Nexon EV Max (both priced around Rs 20 lakh on road) are cheaper by about Rs 3 lakh.

The strong hybrids are a great alternative to pure EVs, as they take care of all the barriers of pure EVs, maintain Japanese carmakers.

Their cost of acquisition — though higher than ICE (internal combustion engine) cars — is lower compared to EVs. EVs are almost 60 per cent costlier than the conventional fuel-based models. 

Hybrids don’t require charging infrastructure as they are self-charging. Therefore, they eliminate range anxiety for customers as, unlike EVs, they have dual powertrains.

India recorded sales of 115,032 hybrids (mild and strong) in FY22, which is 4.2 per cent of the 2.7 million passenger vehicles (PVs) sold.

But the share of the so-called strong hybrids was only 831 units with limited players offering such products.

Nomura Research Institute (NRI) expects the share of hybrids in total PV sales to double. Beyond three years, they may become affordable, backed by Japanese car giants Toyota Motor, Suzuki Motor and Honda Motor.

Earlier, carmakers from Japan made sporadic attempts to popularise hybrid technology in India —Toyota with the Prius and Honda with the Civic, among others.

But in the absence of policy support and incentives, which led to high prices and low volumes, the carmakers had to withdraw the models from the market. While EVs attract a GST of 5 per cent, hybrids attract a much higher 43 per cent GST.

“The Hyryder and Vitara could mark the beginning of a new era of affordable strong hybrids in the Indian market,” says Harshvardhan Sharma, head of auto retail practice at NRI. The companies will declare the prices of models ahead of their launch during the festive season.

This comes even as pure EVs are being touted as a silver bullet to curb tailpipe emissions and achieve carbon neutrality in the country.

So, what has changed? Factors like increased accountability on carbon emissions coupled with a willingness among manufacturers to bring alternative powertrains are leading to the change, says NRI’s Sharma.

Also, unlike in the past, they are now looking to make the models locally and price them competitively.

Rajat Mahajan, partner, Deloitte, points out that high fuel prices (Rs 100/litre), an underdeveloped EV ecosystem and a certain degree of scepticism regarding battery EVs, are also prompting the shift towards hybrids.  

“Amid a new normal on high fuel prices, any vehicle that can offer high mileage will always be preferred,” says Mahajan. 

In certain cases, the difference per litre consumption of an ICE with a mild hybrid or parallel hybrid could be 10 km per litre. Hybrids have demonstrated mileage of 27-30 km per litre, whereas ICE vehicles offer mostly around 12-18 km per litre, he points out.

The proponents of hybrids also argue that policymakers need to take into account emissions from supply chains and power grids when deciding whether battery cars are truly “green.”

While tank-to-tailpipe is green in case of EVs, well-to-wheel is not as India’s electricity generation is still largely coal-fired, said an executive at a Japanese carmaker.