In brief: The drive is real, and Hegel does not deny it – in the Encyclopaedia he gives it a section of its own and expressly calls the human being unfree in so far as he is sunk in his drives. He denies only that the drive is the whole. His reason for doing so is not edification but a contradiction within the drive itself.
1. The drive is the beginning, not the end
In the Encyclopaedia the relevant section is headed „The Drives and Arbitrary Will“ (§§ 473 ff.). The will there is at first „still natural will, immediately identical with its determinacy, drive and inclination“ – and where it lays itself wholly into a single determination, that is called passion. This is not a concession to the objection but its presupposition:
Therefore the human being, in so far as he is sunk in his drives, appears as unfree.
Encyclopaedia (1830), § 473 Addition
2. The contradiction: the collision of the drives
The objection makes this stage absolute without seeing that it is not tenable in itself. Every drive is particular and wills only itself: hunger wills to eat, ambition wills standing, the drive of self-preservation wills rest. But a human being has many drives, and they contradict one another.
Were a human being nothing but drive, he would be the battlefield of these forces – incapable of a unified deed, and precisely not the sovereign natural being the objection paints him as. The question which drive is to be followed cannot be answered by any drive.
3. What follows from the contradiction
Two steps, both unspectacular and both observable. First the I appears as the power of choosing between the drives – that is arbitrary will. Then it organises them: one works now in order to be able to eat and rest later. Hegel calls this the striving for happiness (§ 479). Already here the drive is no longer what determines, but a material.
But happiness too remains arbitrary, because it gives no information about what is supposed to make one happy. Only where the will has a content that it can think is it free on Hegel’s determination – see § 15 note and § 21 ff.
4. Where this arrives in the philosophy of right
Ethical life is not the suppression of the drives but their shape. The urge to have something as one’s own has its legal form in property (§ 41 ff.). The need for standing and regard has its place in the estate and in the corporation, where the individual has his „right, merit, and honour“ (§ 206, § 253). And § 124 expressly holds that subjective satisfaction is contained in the carrying out of a universal purpose – the notion that objective and subjective purposes exclude one another he calls „an empty assertion of abstract understanding“.
At this point, then, Hegel is further from the ascetic than from the philosopher of drives. What he denies is not the force of the drive but its explanatory power.
What the objection keeps
That Hegel ranks the drives systematically below thinking is a decision and not a proof. Whoever holds that thinking is itself only a particularly refined drive will find in him no refutation but a different arrangement of the same phenomena. The dispute has had a long history since, and Hegel does not have the last word in it.
Sources. Encyclopaedia (1830) §§ 469–482 (practical spirit), in particular §§ 473–478 (the drives and arbitrary will) and §§ 479–480 (happiness). – Groundlines § 11–§ 21 (drive, arbitrary will, happiness, purification of the drives), § 124 and note, § 206, § 253. – As the classical counter-position Arthur Schopenhauer, Die Welt als Wille und Vorstellung (1819), and later Friedrich Nietzsche and Sigmund Freud; none of them is Hegel’s addressee, all three are heirs of the same question. – In the glossary: The Will, Arbitrariness, Ethical Life.