The hybrid route to green mobility

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Date: June 26, 2023

India has witnessed an impressive surge in the popularity and adoption of hybrid vehicles. These vehicles combine the benefits of traditional internal combustion engines as well as electric power offering improved fuel efficiency, reduced pollution, and an overall greener alternative. 

With government incentives, technological advancements, and growing awareness about the importance of sustainable transportation, is India moving towards a hybrid future?

The automobile sector plays a significant role in India’s economy, contributing 49% to the total manufacturing GDP and 7.1% to India’s total GDP. Over the past few years,  the industry has been preparing for a major transformation to the EV era as it seeks to bring down its carbon footprint.

In line with its commitment under the Paris Agreement, India aims to reduce the emission intensity of its gross domestic product by 33%-35% by 2030, emphasizing the importance of sustainable practices in the automotive industry. The government has set a target of achieving 30% share of electric vehicles on Indian roads by 2030. The EV market is expected to expand at a CAGR of 49% during 2021-2030, with annual sales volume expected to cross 17 million units by 2030. However, the market is relatively nascent, with electric four-wheeler sales at 53,843 units in 2023 (YoY growth of 154%).

In this period, consumers seem to be gravitating towards a third option – hybrids. The country has observed an impressive demand for strong hybrid vehicles, leading to waiting periods for multi-purpose vehicles (MPV) Toyota Hycross, Hybrid sedan Honda City and the Suzuki Grand Vitara extended up to two years. For the uninitiated, strong hybrid vehicles consist of a combustion engine and an electric motor that can operate together as well as independent of each other. The electric motor is useful in times where you are fine with low speed, like city driving. But when the driver demands more pace, the internal combustion engine kicks in.

With the introduction of a new range of strong-hybrid technology-based vehicles from players like Toyota and Maruti, strong-hybrid EV (HEV) sales overtook battery EV (BEV) sales in two consecutive quarters. The combined sales of HEV and BEV reached 4.3% of the total Indian passenger vehicle market in Q1 2023, with each contributing 2.2% and 2.1% share.

As per the data shared by Autopunditz, strong hybrid vehicle sales reached 22,389 units in Q1, 2023, whereas BEV sales touched 21,109 units in the same period credited to the launch of new vehicles from Tata, Mahindra, Citroen and BYD.

Schemes that support the transition

The government’s schemes launched for the EV industry offer the same benefits to hybrid vehicles, and have therefore been pivotal to their growth. These include:

  • FAME India Phase 2 scheme: The government launched Faster Adoption and Manufacturing of Electric Vehicles in India (FAME 2) with a budgetary outlay of Rs 10,000 crore for a period of five years starting 1st April 2019 to promote hybrid/electric technology in public transportation to reduce dependency on fossil fuels. The scheme aims to support 7,090 e-Buses, 5 lakh e-3 Wheelers, 55,000 e-4 Wheeler Passenger Cars (including Strong Hybrid) and 10 lakh e-2 Wheelers.
  • Production Linked Incentive Scheme for Automobile and Auto component industry: The scheme offers a budgetary outlay of Rs 25,938 crores to provide financial incentives to boost domestic manufacturing of Advanced Automotive Technology products including electric vehicles and their components. It provides incentives for up to 18% of eligible sales of electric vehicles and their components.
  • Demand Incentives: With effect from 11th June 2021, the government has increased the demand incentive for electric two-wheelers to Rs 15,000/KWh from Rs 10,000/KWh along with an increase in cap from 20-40% of the cost of electric vehicles.
  • Import Duty Exemptions: The government has exempted custom duty on certain components like capital goods and machinery required for manufacturing lithium-ion cells for batteries to promote local production, hence making EVs cheaper in the country.
  • Setting up Charging Infrastructure: Under the FAME India Phase 2 scheme, the government has allocated Rs 1,000 crores for the development of charging infrastructure. The ministry has sanctioned 2,877 electric vehicle charging stations in 68 cities across 25 states/UTs. Moreover, 1,576 charging stations across 9 Expressways and 16 Highways have also been sanctioned under the scheme. At the State level, the Delhi government has introduced an EV charging infrastructure action plan for 2022-25. According to the plan, the transport department will set up 18,000 public EV charging stations across the city by 2024.

Why customers take the ‘hybrid’ path?

For a long time, petrol vehicles have maintained a strong presence on Indian roads. However, the emergence of Electric Vehicles (EVs) with their promise of environment-friendly mobility that is easier on the pocket has definitely sparked interest. Nonetheless, transitioning from petrol vehicles to EVs can pose challenges due to their higher cost and the lack of adequate infrastructure. Here are a few key factors contributing to the growing popularity of hybrid vehicles in the country:

  1. Hybrid vehicles are designed to maximize fuel efficiency by combining an internal combustion engine with an electric motor. This dual power source allows for better mileage, reducing the dependency on fossil fuels and saving money on fuel costs.
  2. Hybrid vehicles offer a cleaner alternative to traditional petrol or diesel cars, as they produce lower emissions and contribute to reducing carbon footprints. This aligns with the country’s focus on sustainable and eco-friendly transportation solutions.
  3. An EV or a Hybrid vehicle offer lower running costs. As electricity in India costs about Rs 6 per unit, with about 50 units consumed per month, the running cost for the EV would be Rs 1/km. On the other hand, a petrol car with a mileage of 12 km/litre, using petrol priced at Rs 100/litre, leads to running cost of Rs 8.33/km.
  4. Since a hybrid vehicle runs on electricity, even with a completely drained battery, it switches to functioning as a petrol car, eliminating Range Anxiety (Fear of electric vehicle getting out of charge, leaving the passengers stranded).
  5. The latest hybrid models, with improved technology, offer better battery performance, regenerative braking systems, and seamless integration of electric and internal combustion engines.
  6. As per a recent report by IIT Kanpur, electric vehicles may be actually more environmentally unsustainable at present compared to hybrid or internal combustion engine cars. Through their life cycle, EVs may produce 15-50% more greenhouse gases over the other two options according to the report. The reason for this is that their fuel source (electricity) is still 75% coal-based in the country. Moreover in terms of total cost of ownership, EVs come out to be 15-60% costlier than ICE and hybrid cars.

Over the next few years, the two segments are expected to grow in tandem. An ICRA report projects that CNG, EV and hybrid vehicles will be able to capture 20-30% share of the Indian automotive market by 2030. However, hybrid cars still do not get incentives like EVs and are subject to high GST rate of 29% in tandem with petrol and diesel cars. It is something that the government is discussing internally on the demand of the industry. Given how they have performed despite high taxation, a reduction in GST could actually provide a very strong push to hybrid vehicles in the coming years.

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