India's EV Ecosystem Gains Traction, Model Launches, Policy Incentives Drive Growth: HSBC

The report pointed out that in states offering hybrid incentives, EV growth remained strong even after the benefits were rolled out.

A combination of state-level subsidies and a series of new product introductions has contributed to increased penetration of both EVs and hybrids.

Source : Freepik

India’s electric vehicle (EV) ecosystem is gaining traction, supported by recent model launches and sustained policy incentives. According to HSBC Research, while electric mobility is steadily expanding, hybrid vehicles are also emerging as a strong pillar in the country’s clean mobility framework. Rather than competing, hybrids and EVs are showing signs of mutual growth across markets where both are being promoted.

The report highlighted that hybrid vehicles are not eating into the market share of EVs. Instead, they are serving distinct consumer segments, reported IANS. “We think strong hybrid electric vehicles (SHEVs) and battery electric vehicles (BEVs) are not cannibalising each other but, rather, are attracting different sets of customers. In states where incentives are offered for SHEVs, BEV sales have also seen strong growth,” HSBC noted.

Policy Support, New Launches Fuel Uptick

A combination of state-level subsidies and a series of new product introductions has contributed to increased penetration of both EVs and hybrids. The report pointed out that in states offering hybrid incentives, EV growth remained strong even after the benefits were rolled out. This trend indicates that incentives for SHEVs are complementing the expansion of battery electric vehicles.

“In FY25, the growth in EV sales was similar to the growth in SHEV sales, despite incentives being offered on SHEVs by Uttar Pradesh, the largest PV selling state in India,” the report stated. HSBC interpreted this as evidence that hybrid vehicles are aiding, rather than hindering, EV adoption. “The perception that promoting SHEVs will hinder EV adoption is misplaced, in our view. This is not a zero-sum game, but rather an incremental opportunity where incentivising SHEVs contributes to the broader development of the clean mobility ecosystem, benefiting BEVs and advancing overall market growth,” it added.

Market Shifts Point to Rising Adoption

Recent figures underscored the rising interest in electric four-wheelers. Penetration rose from 1.9 per cent in the first half of FY25 to 2.5 per cent in the final quarter of FY25. The current quarter-to-date period for Q1 FY26 has seen this number rise further to 3.2 per cent, driven by launches such as the MG Windsor and new BEVs from Mahindra & Mahindra.

Similarly, the share of strong hybrid electric vehicles in India’s passenger vehicle (PV) market has grown to 2.4 per cent in FY25, up from 2.1 per cent in FY24. This, according to HSBC, affirms the long-term view that India’s auto sector will evolve through a combination of technologies. “We think India will remain a multi-powertrain industry over the medium to long term,” the report stated, positioning SHEVs, CNG, and biofuels as transitional solutions on the path to full electrification.

By embracing multiple technologies simultaneously, India is charting a more inclusive route to sustainable transportation. HSBC’s analysis suggests that hybrid vehicles and EVs are not rivals, but rather complementary forces shaping the future of mobility in the country.