Hybrid Tax Benefits Are Slowing India’s EV Growth, Says Tata Motors' Shailesh Chandra

In a sharp critique of emerging state-level incentives for hybrid vehicles, Managing Director of Tata Motors Passenger Vehicles and Tata Passenger Electric Mobility Shailesh Chandra has warned that such policies could undercut India’s push toward electric mobility. He argued that tax breaks for hybrids are distorting the market and slowing down the adoption of electric vehicles (EVs), especially in states where these benefits have been introduced. 

Tata Motors, which commands a dominant 65% share in the Indian EV market, views such moves as counterproductive to the national goal of mass electrification. “In one state that offered hybrid subsidies, EV penetration remained stagnant at 1.5%, compared to the national average, which has nearly doubled from 2.5% to 4% in the same period. Some state governments have done it and it has come at the cost of suppressing penetration growth of EVs. That’s what happens when you subsidise a technology that has no barriers, which has natural adoption and you artificially improve the competitiveness significantly. It has suppressed the pace at which electrification would have grown,” Chandra said. 

He noted that this period has seen the launch of six to seven new EV models, and under normal circumstances, that should have spurred a more dramatic uptick in EV adoption. Instead, the unexpected growth has come from hybrids, which have gone from less than 1% to around 2.5% in market share largely, he argues, due to tax incentives. “Whereas on the hybrid side there’s hardly any models, and just because of this benefit, it has enhanced penetration,” Chandra adds. 

Chandra’s comments come as some Indian states have started offering tax parity between hybrids and EVs. Uttar Pradesh, for instance, has waived the registration tax on hybrid vehicles, treating them on par with EVs. Karnataka is also reportedly considering similar tax breaks, including reduced road tax and registration charges. “Our focus is EVs. We believe this is the destination technology and we need to double down on this and we’re doing that. Hybrids we consider as one of the technologies for improving the competitiveness on the ICE side. If market demand comes, we can respond to that,” he said. 

However, his concern lies with what he calls “extra-ordinary benefits” for hybrids that risk diluting the policy momentum built around EVs. “The issue for us is on the incentive side or any extra-ordinary benefit being given to hybrids like taxation rates,” Chandra noted. “Then the question is open for many technologies on the ICE side. Why digress the focus from destination technologies where you have barriers which have to be overcome? If there’s money to be put by the government, that should be on the destination technology,” he said. 

Chandra’s remarks add to an ongoing debate over the role hybrids should play in India’s energy transition. While hybrid vehicle makers argue that the technology serves as a stepping stone, critics say hybrids prolong the use of fossil fuels and shift attention from fully electric solutions that align better with long-term climate goals.

Currently, the central government levies 5% GST on EVs, compared to 43% on hybrids. However, vehicle registration taxes, a state subject, are increasingly being used to narrow this gap. Automakers like Toyota and Maruti Suzuki, which are betting big on hybrids, have welcomed these state moves, while pure-EV players like Tata Motors and Mahindra and Mahindra are pushing back.

The Indian automotive industry is witnessing a fierce policy battle over hybrid vehicle subsidies, with clear battle lines drawn between two camps. Tata Motors and Mahindra & Mahindra are lobbying the government to ensure incentives remain restricted to electric vehicles only, while Toyota Motor and Maruti Suzuki are pushing for hybrid support.

The stakes are enormous, with only 5,384 of the 847,544 government fleet vehicles being EVs in 2022 - less than 1%. When the Commission for Air Quality Management recommended including strong hybrids as "cleaner vehicles" for government fleets in May 2025, it sparked intense opposition from EV-focused manufacturers who argue this dilutes India's EV-only policy framework.

The GST angle adds another layer to this tussle. Currently, electric vehicles enjoy a favorable 5% GST rate, while hybrid cars face a punishing 43-48% effective tax rate including cess. Japanese automakers like Maruti and Toyota have been lobbying for reduced GST on hybrids, arguing they should be taxed lower to encourage their sales. However, Tata and Mahindra oppose any tax concessions for hybrids, insisting that only full commitment to EVs can decarbonize India's roads.

EV makers fear that hybrid incentives could undermine billions in EV investments and create policy confusion. They argue hybrids still rely on fossil fuels, while hybrid proponents contend these technologies can reduce emissions by 30-40% and serve as crucial bridge technology before full EV adoption.