Strong hybrids and BEVs cater to distinct buyers, says HSBC report

HSBC report says BEVs and strong hybrids are not cannibalising sales in states with dual incentives; both segments are growing independently with new launches

Strong hybrid cars and battery electric vehicles (BEVs) are not eating into each other’s market share in states where incentives have been offered to both segments, according to a report released by HSBC on Wednesday.

 

States such as Uttar Pradesh, which last year began offering incentives for both types of cars, have seen both segments grow simultaneously, the report mentioned.

 

Strong hybrid cars, launched by Maruti Suzuki and Toyota in September 2022, “appear” to have gained market share from diesel variants during 2022–23 (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. We think new model launches and government incentives will drive hybrid penetration growth in the near term,” HSBC noted. 

   

It said the growth rates for BEVs and strong hybrid electric vehicles (SHEVs) in FY25 were comparable, reinforcing the view that the two powertrains cater to distinct customer segments rather than competing for the same buyer.

 

“This trend aligns with the economic theory of complementary goods,” the report stated, referencing Nobel Laureate Sir John Hicks, and suggested that increased strong hybrid penetration may positively influence BEV uptake.

 

EV penetration has improved significantly with the launch of new models in recent months. From 1.9 per cent in the first half of FY25, EV penetration rose to 3.2 per cent in Q1FY26 (quarter-to-date), driven by models like the MG Windsor and Mahindra’s new launches. These new models addressed consumer concerns such as battery replacement costs and range anxiety through innovative leasing options and larger battery packs, HSBC noted.

 

“The perception that promoting strong hybrid cars will hinder EV adoption is misplaced, in our view. This is not a zero-sum game, but rather an incremental opportunity where incentivising strong hybrid cars contributes to the broader development of the clean mobility ecosystem, benefiting BEVs and advancing overall market growth,” it said.