Homegrown automakers Tata Motors and Mahindra & Mahindra see no reason for the government to offer tax sops for hybrid vehicles.

There isn't logic in incentivising hybrids as compared to a very strong logic to incentivise EVs, Mahindra & Mahindra CEO and managing director Anish Shah says in an analyst call after the company's fourth-quarter earnings.

Governments around the world for the last 20 years haven't incentivised hybrids because they are more expensive due to two powertrains and emissions are not really better than ICE, Shah says. "Hybrids still use a fair bit of fuel as compared to EVs where you've got zero emissions and zero fuel use."

"EV is the endgame. Hybrids can be something that's in between," Shah says, adding if the consumer wants more hybrids, then Mahindra will be ready for that.

Echoing similar views, PB Balaji, Group chief financial officer of Tata Motors, says there has to be logic to the demand for tax benefits for hybrids which Tata Motors — India's largest electric carmaker — does not see.

"From a policy perspective, we see hybrids as a transition technology. So there is absolutely no business case for the government to actually drive hybrid sales," Balaji says in an investor call. EVs are a foolproof zero-emission technology, he adds.

After witnessing a rapid growth in sales, battery electric vehicles are losing momentum globally due to reduced government subsidies, and concerns around charging infrastructure, forcing some automakers to slash their ambitious electrification targets.

The two homegrown carmakers say comparing the Indian EV market with the rest of the world isn't appropriate. "A lot of people are comparing India with the rest of the world. But I don't think it’s the right thing to do at the moment because our EV penetration is 2%. The others are reaching some kind of saturation after having reached 15-20%," says Rajesh Jejurikar, executive director and CEO of auto and farm sectors at M&M. "In India, we don't do anything which is 10 years ahead of what's needed. So as sales pick up, charging infra will come up," he says.

"Our belief is what the EV market in India needs is a really wow product. Very often we share this with our channel partners and dealers that look at what happened with Thar. There is no rational reason to buy a Thar. It’s just a very emotional wow purchase. We believe that when you have the right proposition, people are going to buy it. That’s what we think will happen with our born electric,” says  Jejurikar, calling today’s electric offerings as only  “functional” including Mahindra’s XUV400.

Shailesh Chandra of Tata Motors says India should definitely not be compared with what’s happening in the U.S. or anywhere else because those factors are not applicable here.

India's largest electric carmaker with 73% market share sold 73,833 EVs in 2023-24, up 48% year-on-year compared with 50,043 units in FY23. The carmaker expects to sell over 1 lakh EVs this fiscal.

Tata Motors has the ability to develop any technology which will be needed in the future but as of now it is sharply focused on EVs because that's the destination technology in the auto industry, says Chandra.

"The government is firmly behind EVs given the issues that the country is facing such as pollution and import dependence on fossil fuel. There is a net zero carbon pledge that the country has taken therefore it is imperative to accelerate EV adoption," Chandra explains.

As part of the upcoming Corporate Average Fuel Economy (CAFE-3) norms, it becomes imperative to have a certain percentage of vehicles as EVs, therefore the direction seems to be very clear that EVs will have to be accelerated, Chandra says.

On CAFE-3, Mahindra's Jejurikar says the new norms will encourage companies to have a very high portfolio of electric vehicles. "It's being designed in a way that you discourage non-electric," he says.

Follow us on Facebook, X, YouTube, Instagram and WhatsApp to never miss an update from Fortune India. To buy a copy, visit Amazon.