Let us give Hybrid a real chance…

Wonderful news! Now (at least theoretically) we have an option to insulate ourselves from the ever-rising fuel prices. Honda has just launched its Civic Hybrid model, and Toyota is not too far behind (plans to launch its Prius model soon). Hybrid cars, which use both petrol engine and electric motor, are usually fuel efficient and have lower emission levels, making them environment-friendly.

These cars however may remain in the “showroom window” as the import duties on these imported kits is huge (114%), resulting in high on-the-road price. Honda Civic is pegged at Rs 2.15 million and Honda is likely to launch Prius at a similar price. It is in fact a chicken-and-egg story – the volumes will not be attractive enough till these manufacturers set up local plants, and the prices will not decrease till the volumes increase.

How can the government step-in and make this opportunity real?

In my view, reducing the customs duty on hybrid cars is an option, but the government is unlikely to oblige since it would like to keep large-engine cars as costly as possible. The government could however permit imports at a lower duty level to those companies that promise to manufacture such hybrid or fuel cell cars locally within a stipulated period of time.

Also, the government could explore imposing harder environmental norms for large-engine cars, thereby encouraging manufacturers to switch to cleaner fuels.

On a parallel note, the government should initiate discussions with local car manufacturers and urge them to start their own hybrid initiatives with a tight timeline. The government could also fund local R&D agencies to accelerate their initiatives in this area.

Whatever be the approach, the government cannot afford to remain a passive spectator on this issue.