Carmakers oppose tax breaks for hybrids, want BEV incentives in Delhi EV policy

Highlights

• Delhi’s draft EV policy has triggered a clash with carmakers seeking ₹1.5 lakh subsidies for electric cars and opposing tax breaks for strong hybrid vehicles.
• The policy proposes strict electrification mandates, including a ban on new ICE three-wheelers from 2027 and ICE two-wheelers from 2028 in Delhi.
• Two-wheeler OEMs and SIAM argue Delhi should scrap older polluting vehicles instead of banning new BS-VI ICE two-wheelers, citing limited EV motorcycle readiness and supply chain concerns.

Carmakers seek EV subsidies for affordable electric cars, oppose hybrid tax breaks in Delhi’s draft EV policy.

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Why should electric two- and three-wheelers qualify for purchase incentives when electric cars are not included in this subsidy architecture? And why is the Delhi government planning to offer tax breaks to strong hybrid vehicles?

These are two most important points among the comments submitted by India’s prominent carmakers for the Delhi EV policy.

The policy proposal has been under intense discussion these last few weeks due to its hard mandates, including banning registration of ICE two-wheelers from 2028 and ICE three-wheelers from next year.

The policy also proposes incentives for purchasing various other categories of EVs through subsidies and reduced taxation without proposing incentives for electric car purchase and has a proposal to offer tax incentives to strong hybrids.

Now, top car OEMs have sought incentives of ₹1.5 lakh per vehicle for electric cars priced below ₹15 lakh. In their latest communication to the Delhi government, these OEMs have said that the purchase incentives being sought should be over and above the scrappage benefits already proposed under the policy.

At least one top passenger carmaker with a growing portfolio of electric cars has also demanded cancellation of incentives proposed for strong hybrid vehicles under the Delhi EV policy.

Another ask is that fleet operators in Delhi be barred from inducting ICE vehicles and should be instructed to exclusively purchase electric cars for use in future.

“We recommend that the policy support remains clearly extended to zero-emission vehicles (Pure EVs), with no tax exemptions for Strong Hybrid Vehicles (SHEVs). Extending benefits such as road tax waivers to hybrids up to any extent risks diluting the policy direction and may slow the transition towards full electrification,” said the communication from one of the passenger car OEMs.

Two-wheelers which were bought before the BS IV regulations account for 99.5 per cent of two-wheeler PM (particulate matter) emissionsSIAM

The policy

The Delhi EV policy draft proposes a mandate for electric-only vehicle registrations, effectively phasing out ICE vehicles in high-volume segments:

• Electric three-wheelers (L5): From January 1, 2027, only electric versions will be permitted for new registration in Delhi.
• Electric two-wheelers: From April 1, 2028, only electric versions will be permitted for new registration.
• No conventional ICE vehicles (diesel or petrol) can be inducted into existing fleets of 4-wheeler LCVs, LGVs (up to 3.5 tonnes), and two-wheelers starting January 1, 2026 (with a limited exception for BS-VI two-wheelers until the end of 2026)
• All hired or leased vehicles for the government must be only electric from the date the policy is notified. Furthermore, all new intra-state buses and N1 trucks purchased or leased by government bodies must be electric
• The school bus fleet (owned or hired) must reach 30 per cent electrification by March 31, 2030, with specific interim targets

The policy also proposes tapering purchase incentives to encourage early adoption:

• Purchase subsidies: Two-wheelers receive up to ₹30,000 in year one while electric auto-rickshaws and N1 goods vehicles receive ₹50,000 and ₹100,000, respectively, in the first year.
• Scrapping incentives: Additional incentives are available for scrapping old Delhi-registered BS-IV and below vehicles, including ₹10,000 for two-wheelers and ₹100,000 for cars (limited to the first one lakh applicants).
• Tax exemptions: Most EVs are granted 100 per cent exemption from road tax and registration fees until March 2030, though cars priced above ₹30 lakh are excluded from this benefit

‘Right to Charge’ framework

Besides seeking demand incentives for electric passenger cars, the OEMs have also “strongly” recommended the formal adoption of a ‘Right to Charge’ framework to ensure that access to home charging is recognised as a key enabler of EV adoption.

“Residents should be permitted to install EV chargers in their private or designated parking spaces in existing buildings, subject to compliance with safety, electrical and fire norms, without unreasonable restrictions from RWAs or housing societies,” they said in their communication on the Delhi EV policy.

Some of the other recommendations are recognising destination charging as a core pillar of passenger EV convenience and range confidence; developing public charging infrastructure with a strong focus not only on scale but also on performance and reliability; enhancing the physical visibility of both existing and upcoming charging infrastructure to address issues of underutilization.

EV technologies have not yet matured enough in terms of cost point and performance to provide a suitable EV alternative to ICE motorcycles, unlike in the case of scootersSIAM

ICE two-wheeler OEMs upset

The strict electrification mandate for two-wheelers (besides some other vehicle categories) in the policy has upset many two-wheeler OEMs. Industry experts say a dilution of the strict mandates is likely in the final Delhi EV policy document; nothing stops Delhiites from circumventing some of these mandates, going to vehicle dealerships in neighbouring Haryana or Uttar Pradesh to buy ICE vehicles.

There is no mandate yet in either state against registration of new ICE vehicles.

Meanwhile, the Society of Indian Automobile Manufacturers (SIAM) has said that two-wheelers which were bought before the BS IV regulations account for 99.5 per cent of two-wheeler PM (particulate matter) emissions and instead of banning registration of new ICE two-wheelers, these older existing vehicles should be removed from the roads of Delhi.

SIAM’s contention is that vehicles which are BS VI compliant have “close to zero” PM emission and imposing an electric-only mandate wouldn’t improve Delhi’s pollution levels in any significant manner.

Of course, the industry body has also spoken about the lack of viable electric motorcycles in the portfolios of OEMs.

Nearly two in three two-wheeled vehicles sold in Delhi are motorcycles and SIAM said “EV technologies have not yet matured enough in terms of cost point and performance to provide a suitable EV alternative to ICE motorcycles, unlike in the case of scooters”.

And supply chain woes have also been highlighted, since Chinese dominance in magnets and some other essential components needed to manufacture EV two-wheelers makes the entire ecosystem vulnerable to pricing and supply shocks.