As the global plug-in hybrid electric vehicle (PHEV) market experiences rapid growth, Indian automotive industry leaders are calling on the government to provide carbon emission efficiency-based tax incentives. This would unlock the significant potential of PHEVs in Indian cities and bridge the market gap between pure electric vehicles (BEVs) and traditional internal combustion engine vehicles.
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Although plug-in hybrid electric vehicles (PHEVs) are experiencing explosive growth in global markets, particularly in China, their progress in India remains hampered by high prices and a lack of targeted policy support. Industry executives point out that bridging this “policy gap” is key to unlocking the PHEV market’s potential.
At the recent “Future Powertrain Conclave” held in Chennai, Mr. Vikram Gulati, Country Head and Executive Vice President of Toyota Kirloskar Motor, stated that PHEVs, capable of covering daily commutes on all-electric power while providing the security of an internal combustion engine when needed, are an ideal choice for urban mobility. He highlighted that this dual-power capability effectively addresses “range anxiety,” a significant barrier to EV adoption in India, while simultaneously reducing urban emissions during daily use.
However, a significant price barrier exists between the ideal and reality. Mr. Gulati added, “Due to larger battery packs and charging hardware, PHEVs cost more. Under the current tax regime, they are even more expensive than strong hybrids, making the Total Cost of Ownership uncompetitive.” He emphasized that India needs merit-based policy support, meaning incentives should be linked to the vehicle’s carbon efficiency and real-world emissions reduction rather than the specific technology type. This approach would create a level playing field and reward all technologies that contribute to cleaner air.
Global Trends Contrast Sharply with Indian Reality
Global data clearly shows the growth momentum of PHEVs. According to the International Energy Agency’s (IEA) Global EV Outlook 2024 report, global sales of plug-in hybrid electric vehicles grew by approximately 60% in 2023, far exceeding the 25% growth rate of battery electric vehicles, with the main driving force being the Chinese market [1].
Mr. Anoop Bhat, Head of Powertrains & xEV Design at Maruti Suzuki India, also cited trends in China: “In China, over the past three to four years, sales of pure electric vehicles have plateaued, while sales of plug-in hybrids and range extenders have climbed. It is expected that this year or next, 50% of all electric vehicles sold in China will be PHEVs.” This shift is largely attributed to pragmatic policy support that recognizes PHEVs’ role in transitioning from fossil fuels without compromising convenience.
In contrast, the Indian market presents a case of untapped potential. Based on statistics from the Society of Indian Automobile Manufacturers (SIAM) and industry sales data, approximately 90,000 hybrid vehicles (primarily mild and strong hybrids) were sold in India in FY 2023-24, accounting for nearly 2% of total car sales [2]. Currently, no mainstream automaker offers a PHEV model in the mass market segment in India, with only a few luxury brands like BMW having a presence. This absence underscores the commercial viability challenge in the face of current fiscal policies.
Technically Feasible, Commercially Challenged
Mr. Bhat affirmed the technical suitability of PHEVs for Indian cities: “A plug-in hybrid with an all-electric range of 50-100 km is sufficient for most urban driving conditions. Daily commuting wouldn’t require diesel or gasoline, only using it for longer trips. So, technically, it is completely viable.” Studies by the NITI Aayog also suggest that such an electric range could cover over 80% of typical daily travel needs in major Indian metros, leading to substantial fuel savings and emission reductions [3].
However, both he and Mr. Gulati agreed that the real bottleneck lies at the commercial level, not the technical one. Mr. Bhat emphasized, “This isn’t just a technical problem; it’s more of a commercial problem. If it were purely technical, PHEVs would already be in the Indian market. The real challenge lies in making it work from a cost and business perspective.” The higher upfront cost, primarily driven by battery and import duties, cannot be offset by fuel savings alone under the current tax structure, creating a prohibitive Total Cost of Ownership for the average consumer.
Calls for Policy Reform, Centered on Carbon Emissions
Both executives unanimously called on policymakers to extend benefits similar to those for BEVs to plug-in hybrid vehicles and suggested linking tax incentives directly to carbon efficiency. They proposed a technology-agnostic framework where fiscal benefits are proportionate to a vehicle’s demonstrated ability to reduce CO2 emissions and fuel consumption over its lifecycle.
“If this issue of merit-based taxation can be resolved, I see no reason why PHEVs wouldn’t take off—and take off rapidly,” concluded Mr. Gulati. “Not only should the additional tax burden be resolved, but some benefits should also be provided, making the Total Cost of Ownership clearly attractive to consumers. Then, the goal is achieved.” He suggested that even a partial GST reduction for PHEVs could significantly improve market accessibility.
As India seeks to accelerate its clean mobility transition, plug-in hybrid electric vehicles could serve as a pragmatic interim step, offering an electric driving experience within the constraints of the existing infrastructure. However, unless fiscal policy responds to create a demand-driven market, the price barrier may continue to keep them out of reach for the mainstream consumer and delay the realization of their environmental benefits.
References:
[1] International Energy Agency (IEA). (2024). Global EV Outlook 2024. https://www.iea.org/reports/global-ev-outlook-2024
[2] Society of Indian Automobile Manufacturers (SIAM). (2024). Indian Automobile Market Performance, FY 2023-24.
[3] NITI Aayog & Rocky Mountain Institute. (2021). India’s Electric Mobility Transformation: Progress to Date and Future Opportunities.
