Hybrids vs EVs: where should government put its money

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In a recent letter to the government, Tata Motors has opposed the further tax cuts on hybrids. Meanwhile, Toyota and Maruti Suzuki are of the view for

In a recent letter to the government, Tata Motors has opposed the further tax cuts on hybrids. Meanwhile, Toyota and Maruti Suzuki are of the view for more tax cuts on hybrids.

Working on greener mobility has become a need for automakers around the world, given the status of global climate conditions in recent years. To accomplish this goal, while other technologies have emerged, EVs (electric vehicles) and hybrids have become the most well-known and broadly accepted, particularly in India.

While both EVs and hybrids are doing well in the Indian automobile market, there is a debate among automakers about which technology is cleaner. The Indian government presently levies a 43 per cent tax on hybrids and a 5 per cent tax on electric vehicles. Toyota Kirloskar Motors is asking the government to reduce taxes on hybrid vehicles by 21 per cent, or one-fifth of the existing amount.

Hybrids better than EVs

According to a letter from Toyota’s India country head, Vikram Gulati, to the Niti Aayog, the corporation is asking for an 11 per cent point tax differential for hybrid vehicles and 14 points for flex-hybrid choices over petrol automobiles. This would decrease the tax on hybrids to 37 per cent and on flex hybrids to 34 per cent. The Japanese automaker believes that hybrid automobiles should receive some legislative incentives because they emit significantly less pollution than gasoline vehicles.

The company claims that the tax gap between petrol vehicles (48 per cent) and hybrid vehicles (43 per cent) is insufficient given the latter’s environmental benefits. Toyota’s rationale for this action is that the firm is currently heavily focused on hybrids, with four hybrid models on the market and intends to expand its hybrid lineup in India.

Maruti Suzuki officials have a similar outlook. The company expects the government to provide incentives for hybrid automobiles because they are more ecologically friendly than battery electric vehicles (BEVs). According to R.C. Bhargava, chiarman at Maruti Suzuki India, EV batteries are charged primarily using power from thermal power plants, making them more carbon-intensive than hybrids.

Maruti Suzuki, the country’s leading automaker, has made significant investments in hybrid technology, which is available on the Grand Vitara and Invicto models. Shashank Srivastava, Senior Executive Officer, Marketing and Sales at MSIL, has previously stated that hybrid vehicles will account for approximately 25% of total Maruti sales in the domestic Indian market by FY31.

The company believes that the advantage of BEVs having zero tailpipe emissions is offset by the fact that BEVs are now charged mostly by electric grids that take power from power plants powered by coal. During the Q2 FY24 results, Maruti Chairman remarked that the government has previously acknowledged that a combination of technologies will be necessary to accomplish India’s carbon neutrality goals, which include EVs, hybrids, biofuels, and CNG.

In fact, a study undertaken by a team of IIT Kanpur experts reveals that hybrid electric cars (HEVs) are more ecologically beneficial than battery electric vehicles (BEVs) based on a comparison of the life cycle emissions (LCA) of both power trains. HEVs powered by e-fuels have emerged as a viable option for sustainable transportation in India.

Counter argument

Tata Motors, a leader in the electric mobility field, claims that hybrids are more environmentally destructive than pure electric vehicles (EVs). As a result, further tax breaks for hybrid vehicles should not be considered. In a letter to the government, Tata Motors argues that incentives should be provided for EVs over hybrids, noting the latter’s higher pollution levels. The company claims that subsidising hybrid automobiles through tax breaks would be detrimental to the government’s overall environmental goals.

Tata Motors’ attitude not only reflects its commitment to electric mobility, but it also paves the way for a potential divergence in regulatory approaches within the Indian automotive market. Besides Tata, Hyundai and Mahindra are also in favour of opposing tax cuts on hybrids. As things stand now, while EVs have been the more popular choice when comapred to hybrids, both the technologies are going head to head on the Indian roads.

As per industry reports, while the EV sales for the industry stand at around 2.2 per cent and hybrids at 2 per cent for 2023, during the last couple of months, the uptake of hybrids have been remarkable.

As the government evaluates its hybrid taxation policy, the industry and environmental advocates will be closely watching the outcome to see how it will affect the country’s adoption of electric and hybrid vehicles.

First Published Date: 21 Jan 2024, 12:02 PM IST

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