Which is better for India - Hybrid or BEV?

India boasts a rich history of automotive innovation and a rapidly growing market. From indigenous manufacturing giants to international collaborations, the country has established itself as a significant player on the global stage. 

As the automotive industry strives to reduce the carbon footprint of transportation, electric vehicles and alternate fuel options are expected to play a crucial role in India's pursuit of a sustainable future. With the demand for affordable transportation and a heightened focus on lowering carbon emissions, the adoption of electric vehicles holds significant importance.

However, the Indian automotive industry does not have a unanimous stance on the most effective sustainability strategy. While some manufacturers are fully committed to electric vehicles, others recognize the potential of hybrids, hydrogen fuel cells, or technological advancements that can make combustion engines greener than battery electric vehicles (BEVs). Although, the current adoption rate for EV in India stands at only 2.0 percent in passenger car segment, there is a significant development happening in the other categories of automotive too and it is picking up fast.

With the government's push for cleaner alternatives to traditional fossil fuel-powered vehicles, the debate between Hybrid and Electric vehicles (EVs) has never been more relevant. Both technologies promise to reduce carbon emissions and dependence on oil, but they cater to different consumer needs and infrastructure challenges.

Background
Hybrid Vehicles

Hybrid vehicles use a combination of an internal combustion engine (ICE) and an electric motor to optimize fuel efficiency and reduce emissions. The electric motor assists the engine, especially during acceleration and at lower speeds, allowing the vehicle to consume less fuel.

Electric Vehicles

Electric vehicles, on the other hand, rely solely on electric power, eliminating the need for an internal combustion engine. EVs store energy in batteries, which power an electric motor. They produce zero tailpipe emissions, making them an environmentally friendly option.

Recent Changes in the Automotive Market

The Indian automotive market has seen significant shifts in recent years. The introduction of more affordable EV models and hybrids, along with the expansion of charging infrastructure, has made these vehicles more accessible to a broader audience. Manufacturers are increasingly focusing on localising production to reduce costs and enhance the appeal of their hybrid and EV offerings.

Comparison Criteria

• Environmental Impact
• Cost and Affordability
• Performance and Efficiency
• Infrastructure and Charging
• Maintenance and Reliability
• Market Adoption and Future Prospects

Detailed Comparison

Environmental Impact

Hybrid vehicles help reduce emissions compared to traditional ICE vehicles by using electric power to supplement the engine. However, they still produce some emissions. EVs, conversely, have zero tailpipe emissions, significantly lowering their environmental impact. The manufacturing process of both technologies can produce emissions, but the overall life cycle emissions of EVs are generally lower.
Cost and Affordability

As of 2024, the total number of EVs available in India stands at 37, while hybrids are only 13. The purchase price of EVs can be higher due to the cost of batteries, but government incentives and subsidies can offset this. In India, EVs attract a GST of just 5%, compared to 43% for hybrids, making them more economically attractive. In Budget 2024, custom duty waiver on EV battery components is likely to bring down the cost further. Long-term costs of EV ownership are lower due to savings on fuel and maintenance.

Cost and Affordability

As of 2024, the total number of EVs available in India stands at 37, while hybrids are only 13. The purchase price of EVs can be higher due to the cost of batteries, but government incentives and subsidies can offset this. In India, EVs attract a GST of just 5%, compared to 43% for hybrids, making them more economically attractive. In Budget 2024, custom duty waiver on EV battery components is likely to bring down the cost further. Long-term costs of EV ownership are lower due to savings on fuel and maintenance.

Performance and Efficiency

Hybrid vehicles offer superior fuel efficiency compared to conventional ICE vehicles. The combination of an internal combustion engine with an electric motor allows hybrids to optimise fuel consumption, providing better mileage and reducing the frequency of refueling. The regenerative braking system in many hybrids captures energy that would otherwise be lost, further enhancing efficiency.
EVs are known for their instant torque and smooth acceleration. Their efficiency is higher due to the absence of an internal combustion engine, and advancements in battery technology are continuously improving their range.

Infrastructure and Charging

The availability of charging infrastructure is crucial for the adoption of EVs. While India is rapidly expanding its charging network, it is still in the early stages compared to the well-established refueling infrastructure for hybrids. Charging an EV can take longer than refueling a hybrid, but advancements in fast-charging technology are addressing this issue.

Maintenance and Reliability

Hybrids typically require less maintenance than traditional ICE vehicles because the electric motor reduces the load on the engine, leading to less wear and tear. EVs have even lower maintenance needs, as they have fewer moving parts and do not require oil changes. The lifespan of EV batteries is a consideration, but technology improvements are extending battery life and reducing replacement costs.

Updates on Indian Government Initiatives and Policies

The Indian government has been proactive in promoting cleaner automotive technologies. Recent initiatives include:

1. FAME II Scheme: The Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) scheme has been extended to accelerate the adoption of EVs and hybrids. This includes subsidies for electric two-wheelers, three-wheelers, and buses.
2. Production-Linked Incentive (PLI) Scheme: This scheme aims to boost domestic manufacturing of electric and hydrogen fuel cell vehicles and components, enhancing the local supply chain and reducing costs.
3. Battery Swapping Policy: To address the issue of long charging times, the government is promoting battery swapping stations, which can significantly reduce downtime for EVs.
4. Tax Incentives: The government offers lower GST rates for EVs and additional income tax deductions on the interest paid on loans for purchasing EVs.

Recent Consumer Changes

Recent consumer changes in the Indian automotive market include:

1. Increased Awareness: There is a growing awareness among consumers about the environmental impact of their vehicle choices. This has led to a higher demand for greener alternatives like hybrids and EVs. Ipsos Global Trends shows that 63% Indians try to buy from brands that act responsibly, even if it costs more.
2. Preference for Fuel Efficiency: With fluctuating fuel prices, consumers are increasingly valuing the fuel efficiency offered by hybrid vehicles.
3. Shift Towards Urban Mobility Solutions: The rise of urbanisation has increased the demand for efficient and compact EVs suitable for city commuting.
4. Acceptance of New Technologies: Consumers are more willing to adopt new technologies, supported by better information and positive word-of-mouth about the benefits of hybrids and EVs.

The Rise of Hybrids in India

Early Beginnings with Honda

The journey of hybrid vehicles in India began with Honda, which introduced the Honda Civic Hybrid in June 2008. This marked the entry of hybrid technology into the Indian market, combining a 1.3-liter gasoline engine with an electric motor to offer improved fuel efficiency and lower emissions. Despite its advanced technology, the Civic Hybrid faced challenges due to its high initial cost and the lack of government incentives at the time. However, it set the stage for future hybrid innovations and paved the way for other manufacturers.

Toyota's Dominance in the Hybrid Market

Toyota introduced the first mass-produced hybrid vehicle, the Toyota Prius, in 1997. The Prius utilised Toyota's Hybrid Synergy Drive system, which combined a gasoline engine with an electric motor to improve fuel efficiency and reduce emissions. This breakthrough innovation set the stage for the widespread adoption of hybrid technology in the automotive industry.

Toyota's extensive R&D has led to innovations that have made hybrids more appealing and practical for Indian consumers. By localising the production of key hybrid components, Toyota has managed to reduce costs, making hybrids more affordable in a price-sensitive market like India.

Why Hybrids Will Gain Momentum
Technological Advancements
Ongoing advancements in hybrid technology are enhancing the efficiency and appeal of these vehicles. Improvements in battery technology are increasing energy density and reducing charging times, extending electric-only driving ranges and minimising downtime for charging. Regenerative braking technology is also evolving, capturing more energy during braking to recharge the battery and reduce fuel consumption.

Expanding Infrastructure

As electric vehicle infrastructure expands, hybrids serve as a transitional technology, combining the convenience of widespread refueling options with the efficiency benefits of electric propulsion. These dual capabilities position hybrids as a flexible and pragmatic choice for consumers navigating the shift towards sustainable transportation options, ensuring reliability and accessibility in both urban and remote settings alike.

Increasing Model Variety

The introduction of diverse hybrid models across various segments is expanding consumer choice and enhancing the appeal of hybrids in the market. The broader variety allows hybrids to cater to different preferences and needs, whether it's for spacious family vehicles or sleek urban commuters. By offering options that blend fuel efficiency with varying levels of performance and features, automakers are meeting the demands of a wider audience, ranging from luxury sedans to compact SUVs.

Affordability and Accessibility

Manufacturers like Toyota and Maruti Suzuki are increasingly localising production and reducing costs, making hybrids more affordable and accessible to a broader demographic. This strategic approach not only lowers the initial purchase price but also enhances the value proposition of hybrids through reduced ownership costs, particularly in terms of fuel savings.

Conclusion

Based on Ipsos' previous research experiences and comprehensive understanding of the sector, we have discovered that consumers tend to navigate their vehicle purchasing process through three main criteria. Firstly, they pay attention to personal satisfaction - they deliberate on whether the selected model adequately caters to their functional and emotional demands.

Secondly, they consider the repercussions on their families and immediate community - they ponder if their choice aligns with their requirements as well. Lastly, they extend their contemplation to the wider panorama - they ponder the eventual global impact of their decision

In light of above, Hybrid vehicles are now emerging as a practical and sustainable solution for the present in the dynamic landscape of India's automotive industry. With rising sales, continuous technological advancements, and supportive government policies, hybrids are set to gain even more momentum in the coming years.

As India moves towards a greener and more efficient transportation system, hybrid vehicles may play a crucial role in driving this transformation. We have started seeing visible results too with share of Hybrids going up from 1.6 to 2.1% from Q2 23 to Q2 24 while EV has dropped from 2.7 to 2.5% during the same period. We also see a projected 38% growth in HEV sales by FY2025, and hybrids are set to play a crucial role in sustainable mobility solutions as per JATO.

Taking this into account, it’s imperative for automobile manufacturers to more effectively manage customer expectations - particularly regarding product offerings for EV’s and Hybrids. The industry needs to ensure consumers perceive purchasing a new EV or Hybrids as a holistic decision, which not only favours sustainability but also caters to functional & emotional needs, as well as family & community considerations. 

In conclusion, the responsibility of managing these social brand aspects falls to the industry. Brands need to adopt a world view that considers local communities and wider society. Adopting this empathetic stance will facilitate the crafting of strategies that resonate with consumers on multiple levels, ultimately shaping the future course of the industry.

Balaji Pandiaraj is executive director, head of automotive research and country service line leader, customer experience, Ipsos India. Views expressed are his own.