India’s electric vehicle market is expanding, with hybrids and EVs growing together, supported by new models and government incentives, HSBC reports.
India’s transition to clean mobility is progressing through a multi-pronged approach that includes battery electric vehicles (BEVs), strong hybrid electric vehicles (SHEVs), compressed natural gas (CNG), and biofuels, HSBC Research said on Wednesday. The bank’s latest findings suggest that hybrids and EVs are not in direct competition but instead serve different segments of the passenger vehicle market.
In its report, HSBC noted that EV penetration in the four-wheeler segment rose from 1.9% in the first half of India’s financial year 2025 (FY25) to 3.2% in the first quarter of FY26 (quarter-to-date), supported by the introduction of new models such as the MG Windsor and battery electric vehicles from Mahindra & Mahindra.
At the same time, the share of SHEVs in the total passenger vehicle (PV) market increased to 2.4% in FY25, up from 2.1% the previous year. This parallel growth has occurred despite the perception that hybrids might cannibalise demand for battery-powered vehicles.
Complementary Growth, Not Competition
HSBC stated that strong hybrids and BEVs attract distinct customer groups, particularly in regions where state-level incentives are available for both categories. “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,” the report said.
The report pointed to Uttar Pradesh—India’s largest state in terms of PV sales—as a case study. Despite the state offering financial incentives for SHEVs, BEV sales have also seen notable increases. “In FY25, the growth in EV sales was similar to the growth in SHEV sales,” HSBC observed, highlighting the coexistence of the two technologies.
The bank argued that incentivising hybrids does not hinder EV adoption. “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 said.
Role of Policy and Innovation
Government policy has played a significant role in shaping consumer preferences and boosting adoption across powertrain types. Multiple Indian states have introduced subsidies for both EVs and hybrids to encourage cleaner transportation solutions and reduce dependence on fossil fuels.
In addition to incentives, recent vehicle innovations are also making electric mobility more accessible. HSBC pointed out that new BEV models have addressed major consumer concerns—such as high battery replacement costs and limited driving range—through features like larger battery packs and leasing options.
These developments are expected to further improve customer confidence and stimulate demand in the quarters ahead.
Long-Term Outlook: Multi-Powertrain Market
According to HSBC, India is unlikely to adopt a single technology solution for decarbonising its transport sector. Instead, the country is expected to remain a “multi-powertrain” market over the medium to long term, with hybrids, EVs, CNG, and biofuels coexisting.
“Hybrids, CNGs and biofuels are practical medium- to long-term solutions, while the country moves towards eventual electrification,” the report stated.
The co-development of these technologies reflects the complexity of India’s automotive landscape, where infrastructure readiness, affordability, and regional disparities shape consumer choices. By diversifying its approach, the country is building a more resilient and inclusive path to low-emission mobility.
Context: India's Push for Clean Mobility
India has made clean transportation a key part of its climate strategy, aiming to reduce carbon emissions and urban pollution. Central and state governments have launched several programmes—such as the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) scheme—to encourage the use of electric and hybrid vehicles.
However, challenges remain, including limited charging infrastructure, high upfront costs, and concerns over battery disposal. As a result, hybrid technologies—which offer fuel savings without relying on external charging—have emerged as a practical interim solution.
HSBC’s findings suggest that fostering both hybrid and electric technologies may accelerate the country’s overall transition, rather than forcing a binary choice between them.