The Delhi government’s decision to exclude hybrid vehicles from tax benefits in its electric vehicle (EV) policy is part of a growing national trend. Over the past year, hybrid cars have steadily lost fiscal support across India, with states from Uttar Pradesh to Rajasthan rolling back incentives to prioritize full EVs.
This policy shift follows a fierce industry debate that pitted homegrown carmakers Tata Motors and Mahindra & Mahindra against Japanese giants Maruti Suzuki and Toyota over whether hybrid technology deserves government backing.
Mint explains why hybrids are rapidly falling out of favour with policymakers.
Where have hybrids lost incentives?
Delhi became the latest key market to drop the idea of incentivising hybrid vehicles by waiving road and registration taxes. Over the past year, Chhattisgarh, Rajasthan and Uttar Pradesh have also withdrawn such incentives for hybrid cars, choosing to back only 100% electric vehicles to accelerate their adoption.
Meanwhile, large hybrid vehicles also lost their 2-7% GST edge over petrol and diesel cars when the government revised GST rates across the board in 2025. They used to be taxed at 43% in the old GST regime, compared to 45-50% for ICE vehicles. Now, large hybrid vehicles are taxed at 40%, similar to their ICE cousins.
Why do some companies want incentives for hybrid cars?
Japanese carmakers such as Maruti Suzuki and Toyota Kirloskar Motor have been demanding incentives for hybrid vehicles. They argue that because this technology is currently limited to larger sports utility vehicles (SUVs), hybrids pull market share away from diesel cars.
Maruti has also argued that hybrid vehicles offer significantly higher mileage by using a small battery pack alongside an engine. This combination results in lower fuel consumption, which could cut oil imports if adopted on a large scale. Furthermore, the carmakers argue that given the lack of adequate charging infrastructure, hybrid vehicles can serve as a pathway toward eventual full electrification.
What is the main opposition to incentivising hybrids?
The biggest opposition is from Indian carmakers Tata Motors Passenger Vehicles and Mahindra and Mahindra, which argue that incentives should be limited to EVs as hybrids represent a temporary pit stop on the road to full electrification.
These carmakers have argued that resources should be directed towards helping consumers adopt the cleanest technology and create infrastructure to support electrification instead of backing a ‘transient’ technology.
Given the prime minister's call to boost electric mobility and meet the country’s 2030 targets, policymakers seem to have aligned with homegrown carmakers for now, focusing incentives strictly on EVs.
Will this discourage new hybrids in the Indian market?
The lack of incentives has already hurt sales growth of hybrid vehicles in India over the past year. Between January and May this year, India's total hybrid vehicle sales rose 12% to 48,846 units, compared to 20% growth in all passenger vehicle sales to 2.24 million units. Electric four-wheeler sales surged 74% to 117,489 units over the same period, putting them at 5.2% penetration against 2.2% for hybrids.
However, carmakers have remained committed to launching new hybrids, partly because of strict fuel emission norms coming next year. Hyundai, Honda, Renault, JSW Motors, Kia and JSW MG Motor India are among the carmakers that have committed to launching hybrid vehicles over the next few years.
What’s the demand for such vehicles in India?
Some analysts remain bullish on the prospects of hybrid vehicles in India, pointing to evidence that these models can gain market share even without government incentives. “We see strong hybrids scaling from around 2.3% of passenger vehicles today to 7-8% by 2030, driven by a near-doubling of the model catalog by FY28, policy notwithstanding,” analysts at Bernstein wrote in a 15 June report.
Deloitte's Global Automobile Consumer Study 2026 for India showed that while 50% of consumers preferred fossil fuel vehicles as their next purchase (down from 54% last year), 25% preferred strong hybrids (up from 21% last year), 10% preferred plug-in hybrids (down from 12% last year) and 10% preferred pure EVs (up from 8% last year).