Hybrid vehicles complementing growth of EVs in India: HSBC report

Hybrid vehicles have complemented the growth of electric vehicle sales in India rather than competing with the latter, according to a report by HSBC Global Research.

Reiterating that the Indian automotive landscape will remain a multi-powertrain industry over the medium to long term, HSBC Global Research said hybrids, CNGs, and biofuels are practical medium- to long-term solutions, while the country moves towards eventual electrification.

"We think Strong Hybrid Electric Vehicles (SHEVs) and Battery Electric Vehicles (BEVs) are not cannibalising each other but, rather, are attracting different sets of customers," the report said.

In states where incentives are offered for SHEVs, BEV sales have also seen strong growth, it added.

"In FY25, the growth in EV sales was similar to the growth in SHEV sales, despite incentives being offered on SHEVs by Uttar Pradesh, the largest PV-selling state in India. This trend suggests that SHEV adoption is having a positive effect on BEV sales," the report pointed out.

Asserting that the perception that promoting SHEVs will hinder EV adoption is misplaced, the report said, "This is not a zero-sum game, but rather an incremental opportunity where incentivising SHEVs contributes to the broader development of the clean mobility ecosystem, benefiting BEVs and advancing overall market growth."  It noted that EV penetration has improved with new model launches over the last six months.

Four-wheeler (4W) EV penetration has improved from 1.9 per cent in the first half of FY25 to 2.5 per cent in the fourth quarter of FY25 and 3.2 per cent in the first quarter of QFY26 quarter-to-date period, driven by launch on MG Windsor and M&M BEVs, the report said.

The SHEV share in total PV has increased to 2.4 per cent in FY25 from 2.1 per cent in FY24.

Customers are willing to buy an EV if the value proposition is right, it said, citing examples of MG Windsor which addressed concerns about the replacement cost of the battery after 7-8 years by giving leasing solutions; while M&M's BEVs addressed the range anxiety concerns with a large battery and made EV a style statement.

The report noted that SHEVs, launched by MSIL and Toyota Kirloskar in September 2022, appear to have gained market share from diesel variants during FY23 and FY24. However, hybrids stabilised in FY25 as the share from diesel variants was stable during the year.

This was despite incentives being offered by multiple states during the year, it said, adding that new model launches and government incentives will drive hybrid penetration growth in the near term.