Hybrid cars are gaining on EVs in India because they represent a gradual pathway to energy transition. Lack of charging infrastructure offsets the tax advantage EVs enjoy over hybrids. Besides, EVs are still more expensive to manufacture, with research costs yet to be priced in and relatively immature supply chains. This raises the question of whether EVs should continue to enjoy their tax advantage over hybrids that offer a cheaper and more pragmatic solution to emission control. It depends on how lawmakers look at hybrids. If they see them as catalysing electric mobility, there could be a case for incentivising the technology. That would, however, trap a large section of Indian car buyers in a half-solution.
Hybrids run on electricity generated by burning fossil fuels. This situation will not change as we move up the hybrid technology tree. EVs, too, run on electricity produced in India principally from fossil fuels. However, transition to renewables makes EVs progressively less polluting. At some point in the future, EVs will be far cleaner than hybrids. So, do the two categories deserve the same fiscal encouragement?
The lower cost of operating an EV is offset by its sticker price and convenience in charging. Additionally, its accelerated depreciation as energy generation and storage tech won’t level out against internal combustion engines (ICE) on all three parameters. Tax breaks for hybrids could risk slowing the energy transition.
However, there might be immediate gains in emissions. A car owner who pays half as much in his hybrid to get from home to the office is unlikely to revert to a gasoline engine. His next purchase would probably be an EV that gets him there, at a tenth of the cost. This first shift is already evident in sales of hybrids. The second shift is governed by the competing ecosystems of fuel-burning and battery-operated cars. The fork in the road is real.
