Hybrid Cars to Outpace EV Adoption in India in the Near to Medium Term: Report

As the energy transition in India moves quickly towards green energy, hybrid penetration will increase faster in the near to medium term, according to a report by Institutional Research. The key drivers behind the hybrid penetration will be the expanding hybrid vehicle portfolios of Original Equipment Manufacturers (OEMs). The report stated that Electric Vehicles (EV) penetration will increase only gradually, as technology and charging infrastructure catch up.

"We expect EV penetration to increase only gradually, as technology and charging infrastructure catch up. We expect hybrid penetration to increase faster in the near to medium term, and believe a key driver for this will be the expanding hybrid vehicle portfolios of OEMs," says the report.

The report says the automotive sector is going through a once-in-a-century kind of transition towards greener energies.

The auto component Industry is making investments to adjust product portfolios to cater to the energy transition and be future-ready for when the penetration of greener energy vehicles reaches an inflexion point.

"We expect the domestic auto component industry to consolidate during this transition, with imports likely to be higher than usual, as auto component players in global regions where the energy transition has already seen meaningful penetration have the necessary technology in place and are already producing components at scale," said the report.

Currently, the vehicle demand is slowing down, as higher inflation and interest rates are impacting urban demand. However rural demand continues to recover, aided by a good monsoon and strong crop production.

The report anticipates that the domestic Passenger vehicles (PV) industry will grow at a 5-7 per cent Compound annual growth rate (CAGR) over the medium term, while the domestic two-wheelers (2W) industry is expected to grow at an 8-10 per cent CAGR.

The report further added that the domestic Commercial Vehicle CV industry will begin its upcycle at some point in the financial year (FY) 2026, driven by continued higher economic growth and the government's focus on increasing capex.

Exhibiting positive sentiment on automotive exports from India, the report added that China+1 and Europe+1 diversification trends are contributing to this optimism.