The hybrid vehicles — dual powered by a petrol engine and an electric motor — are gathering strong traction amongst SUV buyers versus all electric battery-operated passenger vehicles. The reason for this is a lack of charging infrastructure and lower price premium over an EV.
Hybrids which are seen as a strong alternative to diesel not only give a higher fuel efficiency than petrol, but also give the experience of an EV — without any anxiety of range, given the penetration of charging infrastructure.
Not surprising then that the sale of mainstream hybrid vehicles is set to cross the one lakh mark in a short span of 24 months. This is versus the much-in-vogue electric, which is being demanded by the government to reduce the fuel import bill and by environmentalists due to the challenges of global warming.
Already, about a fifth of the Grand Vitaras sold by Maruti Suzuki are powered by a hybrid powertrain. That number is higher for the global hybrid specialist Toyota Urban Cruiser Hyryder — a third of these sold are hybrids. And when it comes to the Innova HyCross MPV, the share is even higher. Honda Cars India too which had started selling the City Hybrid in 2022, got a fantastic response and had more than doubled its allocation for 2023 to cater to the rising demand.
Shashank Srivastava, Senior Executive Officer, Sales and Marketing at Maruti Suzuki says, “The hybrid is witnessing a strong acceptance in the major cities. The fact that a hybrid vehicle in a city traffic runs on battery 40-50 percent of the time, gives the consumer a feel of an EV without worrying about range and the charging infrastructure. The price premium between a hybrid and EV equivalent over petrol, hybrid is better off, despite high GST.”
Over the last three months, hybrid vehicles have outsold electric vehicles and the cumulative sales gap between EVs and hybrids in FY24 has come down to about 10,000 units only, as against almost 20,000 units. In FY23 about 58,000 battery electric vehicles were sold versus about 40,000 units of hybrid, this gap has further reduced, with sales of 52,000 hybrid vehicles in April to November of FY24 as against the BEV sales of about 63,000 units.
The gap would have narrowed further if not for shortage of components and capacity constraints, say industry players. There is a significant waiting period of over 8-12 months for hybrids for some models like Invicto and HyCross and the booking momentum continues. However, most of the EVs are readily available and some even have discounts.
The trend is quite similar in the evolved markets of Europe and the US. In the first 10 months of this calendar year, the sales of hybrid in Europe grew by a strong double digit, accounting for 29 percent of the overall market, whereas BEVs accounted for 14 percent in EU, more than diesel for the first time, as per the Europe Automobile Manufacturers’ Association or ACEA.
In the US, hybrid vehicles accounted for 8.3 percent of the overall market, whereas EVs were at 6.9 percent in the 11 months of 2023. Hybrid penetration was at 5.5 percent and EVs were at 5.2 percent in 2022, underlining how the hybrids are outpacing EVs in the United States of America.
Factors driving hybrid growth
The acceptance of a hybrid is not a one off. The sales trend has been upwards and over the past several months, a greater number of people are opting for hybrids versus EVs, indicating that the acceptance will only grow for hybrids.
Experts say there are three key factors driving the demand for a hybrid versus an EV – the higher acquisition price, lack of charging infrastructure and the mileage offered by a hybrid, which was earlier delivered by a diesel vehicle. But the rising cost of upgrading diesel to new emission norms and the government’s view on diesel being a dirty, polluting fuel along with some states banning usage of the same has compelled some diesel buyers to opt for hybrids.
Apart from the inadequate charging infrastructure, there are challenges in having a dedicated parking spot at home or societies, thereby offering further resistance for EVs.
Sales gap narrowing between Hybrid and EVs
What is interesting is that there are over a dozen electric vehicle models available in the marketplace, versus only four in the hybrid vehicle space.
Hybrids cost about Rs 2.5 to Rs 2.9 lakh higher than petrol vehicles at present, whereas EVs come at a premium of over Rs 3.5 lakh in the case of an EV SUV.
Despite higher prices and lower options, there are increasing numbers of prospective buyers who are seeing the value in a hybrid vehicle over an electric vehicle. The penetration of EVs at present is around two percent, whereas for hybrids it is about 1.75 percent.
The homegrown vehicle makers Tata Motors and Mahindra & Mahindra have made a bet on the all-electric strategy to address the climate change challenge and aligned to the government’s vision. Meanwhile, the Japanese car makers still feel that till prices of batteries don’t come down and the source of energy is not green, the hybrid is a very critical bridge to the emission requirement of the future.
According to the Government of India, the penetration of electric powertrain in passenger vehicles is likely to be about 30 percent by the end of the decade. This means that 70 percent of the market will be powered by internal combustion engine, which is what the Japanese car makers like Maruti Suzuki, Toyota Kirloskar and Honda Cars India feel — that by adding an electric powertrain to an ICE, it not only emits less but is also very good on fuel efficiency — helping address the dual challenge of emission and fuel import bills.
The hybrid debate is on
While there is debate out there on what is better, a Hybrid or an EV, given that India’s energy mix is predominantly powered by thermal sources, there are some who claim that on a well to wheel basis, hybrids may be cleaner for the time being. The contrarian view is that in a lifecycle of over 50,000 kilometres usage – EVs are still cleaner with thermal powered energy. Plus, hybrids are considered a temporary solution, so why invest in an intermediate solution, if the eventual goal is zero emission, where BEVs score better.
And this is further backed by a theory that battery cost is deflationary in nature and internal combustion engines are inflationary to meet the stringent emission norms of the future. The fact is this is yet to have a meaningful impact so far, Tata Motors however believes that EVs and ICE mass market cars will be available at almost the same price in the next 18 months.
Maruti’s Srivastava said, the source of energy will vary from country to country, given the higher concentration of thermal energy in India, one needs to consider the well to wheel emission.
“Till the EVs become mainstream, there are other technologies, one should adopt that address the pollution challenge and any technology like CNG, CBG, or hybrids that facilitate reduction in pollutants should be seen favourably from the tax lens perspective. A five percent GST on EVs versus 43 percent GST on Hybrids or CNG, the gap is big. Yes, the future is EVs, but till the time the infrastructure and source of energy is not clean, hybrids have a very critical role to play in India’s context,” Srivastava said.
The comment from the head of sales at Maruti Suzuki comes at a time, when the market leader is readying its first EV for the Indian market. The EV will hit the roads in about a year’s time. The company has committed over Rs 10,000 crore on EVs with a strong emphasis on localisation, including the battery. In fact, the company is going to use India as a base for exports.
Srivastava says the company is cognisant that the five percent GST on EVs will move up some day hence there is a need to have multiple alternatives. The company’s future vehicles will be powered by half a dozen different sources to ensure that the vehicles of the future are not only less emitting and efficient but are also accessible to the larger masses to have a meaningful impact on the environment.
The company has guided that 25 percent of its total sales by 2031 will come from hybrids and 15 percent from EVs. Even from the balance, 60 percent of the internal combustion engine sales will come from CNG — thereby contributing towards addressing the dual challenge of emissions and oil imports.
More hybrids on the anvil
From a hard stand in the past, the government too has started viewing hybrids more favourably. Some state governments already offer benefits to the hybrid powertrain. It is only a matter of time that penetration grows and the higher localisation of powertrain parts will make hybrids more affordable.
While Maruti Suzuki and Toyota will continue to offer the hybrid powertrain in more models in the future, including the smaller compact vehicles, the likes of the Renault Nissan Alliance, the Volkswagen Group amongst others are exploring possibilities of bringing in the hybrid due to lack of diesel powertrain in their portfolio.
The Renault Nissan Alliance has recently committed USD 600 million in the Indian market — which is aimed at bringing in the mid-size SUVs for both the brands and an entry level electric vehicle. Meanwhile, both the companies are exploring a hybrid powertrain too, to be part of their mid-size SUV plan.
Even Skoda Auto Volkswagen India is looking beyond the India 2.0 project with further models in the future. The European auto major is exploring a new platform for India called MQB A0 37 which can accommodate hybrid powertrain to offer a competitive offering in the marketplace, dominated by Maruti Suzuki.
Even Mahindra & Mahindra’s Rajesh Jejurikar, Executive Director and CEO of the Automotive and Farm business had recently told analysts that as a group while the priority is on Battery Electric Vehicles for now, at a later date, the company may consider hybrid powertrain for specific products and specific segments, underlining the role of this bridge in the future.
Experts say a key consideration for the hybrid is the stringent CAFE Norms (Corporate Average Fuel Economy Norms) wherein the hybrid vehicle will play a critical role if the electric vehicles don’t take off as anticipated.
This article was first published in Autocar Professional’s December 15, 2023 issue.
