India’s hybrid car market is losing momentum as electric vehicles (EVs) pull ahead due to rising demand amid the West Asia war-induced fuel concerns and loss of its tax advantage over the fossil fuel variants eroding its appeal. Even as the broader passenger vehicle market posted robust sales, hybrid vehicles—which can run on fossil fuels as well as an electric motor—are losing pace in 2026, even as automakers prepare a string of launches to revive the segment.
EV penetration, or its share in total vehicle sales, has pulled significantly ahead of hybrids, widening the gap to more than 4% in recent months from around 2% in December 2025, as the growth in hybrids sales has lagged the overall industry for four consecutive months since February, data from government’s Vahan portal showed.
Notably, sales of hybrid cars recorded a year-on-year decline in sales for the first time since separate data became available in May 2026, with total volumes falling 1.3% to 8,421 units as against overall passenger vehicle industry growth of 25% to 404,000 units. EV sales, on the other hand, surged 81% to 26,682 units during the month, giving it a 6.6% share in total sales as against the 2.1% share of hybrids.
Between January and May this year, India’s total vehicle sales rose 12% to 48,846 units as against a 20% growth in total passenger vehicle sales to 2.24 million units. Electric four-wheeler sales in the same period surged 74% to 117,489 units, giving it a 5.2% penetration as against 2.2% for hybrid vehicles.
Industry executives are pinning hopes on a series of launches in the hybrid segment by Hyundai, Renault, Kia, JSW MG and Honda to revive growth and bring back customer interest.
The developments come about a year after carmakers such as Tata Motors, Mahindra & Mahindra and Maruti Suzuki voiced a split view on whether hybrid vehicles need additional incentives as part of central and state government’s clean mobility push.
“We have seen sales of hybrid vehicles stall over the past few months. Hybrids are not growing as we expected. While it provides a significant advantage on mileage, the higher upfront costs have held back purchases, as the GST (goods and services tax) advantage is gone while states like Uttar Pradesh have also withdrawn sops for the technology,” an executive at a carmaker said on the condition of anonymity.
Earlier, large hybrid SUVs were typically taxed at 43% GST and held an edge over the traditional fuel-powered ones that attracted 45-50%. With all large vehicles now taxed flat 40%, hybrid vehicles do not enjoy any advantage on GST over similar internal combustion engine (ICE) ones.
Moreover, while hybrids saw a 3% cut in GST, equivalent petrol and diesel-run vehicles saw cuts in the range of 5-10%, which boosted their sales. In another hit, the large state of Uttar Pradesh withdrew its road and registration tax for hybrids in October 2025, retaining the sop only for EVs.
With hybrid vehicles typically ₹2-4 lakh more expensive than its petrol or diesel-run peer, the advantage on taxation had earlier helped reduce the upfront costs for consumers.
The energy disruptions induced by the West Asia war have queered the pitch further for hybrids in favour of EVs. “Customers have become increasingly aware about electric vehicles and there has been a strong surge in inquiries and sales of such vehicles. Due to all the developments around West Asia, this helped in the surge in sales of EVs in the last few months,” C.S. Vigneshwar, president at Federation of Automobile Dealers Association, said.
There are also not many options in hybrids. “Hybrids have remained weak and one of the reasons is less options for consumers. But they may get a boost after multiple models are rolled out by carmakers in the next few years,” Vigneshwar said.
Only three carmakers, Maruti Suzuki, Toyota Kirlosokar and Honda Cars, currently offer hybrid vehicles in India.
The deceleration in hybrid car sales has shown up Maruti’s portfolio.
The carmaker introduced a new hybrid model in September, but it is seeing better traction for its lone EV that entered the market in February this year. As per Vahan data, the Maruti eVitara sold 1,631 units in May as against the cumulative volume of 1,497 for its three hybrid models (Victoris, Grand Vitara and Invicto).
sees use of hybrids as a way to reduce the country’s fuel consumption, which was recently stressed upon by Prime Minister Narendra Modi. “In this context, strong hybrids are immensely relevant. SHEVs reduce fuel consumption significantly and can bring immediate benefits without dependence on external charging infrastructure,” said Rahul Bharti, senior executive officer of corporate affairs at Maruti Suzuki. “However, taxation disadvantage is limiting this powerful technology to contribute to the nation when it needs the most.”
According to an analyst note by Bernstein on 15 June, India will see hybrid models grow from 8 in 2025 to about 27 in 2030, which could help drive adoption of the technology. The ramp-up in hybrid technology would come as carmakers look to comply with upcoming Cafe 3 (corporate average fuel efficiency phase-III) norms, which will limit average emissions across a manufacturer’s fleet, forcing them to introduce cleaner fuel technologies such as EV, compressed natural gas (CNG), hybrids and flex fuel.
“We see strong hybrids scaling from ~2.3% of PVs today to 7–8% by 2030, driven by a near-doubling of the model catalog by FY28, policy notwithstanding,” Venugopal Garre and Param Shah of Bernstein wrote in the note. “The 40% GST wall and improving BEV economics are real risks, so our conviction is deliberately anchored to the back half of the decade. Through FY30, as supply unlocks, the beneficiaries should be those most exposed to this ramp.”
High-end carmakers are also starting their product offensive in the segment, with Mercedes launching the country’s first plug-in hybrid on Monday.
“The plug-in hybrid provides customers the benefit in terms of fuel efficiency as range is 32 kilometre per litre,” Santosh Iyer, chief executive at Mercedes Benz India, said.
While hybrid vehicles are struggling, some in the industry believe further tax tweaks wouldn’t be needed to drive sales.
“Whether now the benefit should also be extended at the time of purchase, maybe this can always be debated. In our view, I think the taxation policy is quite clear,” Iyer said. “We don’t need to now make it too complicated with additional tax incentives for a different powertrain.”
Mint‘s emailed request for comments from Maruti, , Honda, Renault, Toyota, Tata Motors and Mahindra remained unanswered until press time.
