Hyundai shifts strategy, plans hybrid cars for India: sources

Hyundai Motor Group plans to launch its first hybrid cars in India as early as 2026, three sources said, as the South Korean auto group shifts strategy to look beyond electric vehicles and boosts its presence in a key market.

The group, housing Hyundai Motor and Kia Corp, is evaluating a hybrid sport-utility vehicle of size similar to its top-selling, mid-sized Creta SUV in India, said two of the sources, who have direct knowledge of the plans.

Both Hyundai, which is India's second-largest carmaker, and Kia are targeting the launch of hybrid SUVs in 2026 or 2027, the two sources said, adding that their EV plans for India were also on track.

In a statement on Tuesday, Hyundai Motor Group told Reuters it was "committed to a future of electrified mobility and will optimise product strategies for each market".

The pivot to hybrids - which use a gasoline powertrain and electric motor - comes as Hyundai sees a surge in sales of the technology in India, prompting it to shift away from an initial strategy that focused only on battery-driven electric vehicles.

Hyundai and Kia, which now sell only gasoline and diesel cars and imported EVs such as the IONIQ 5 and EV6, respectively, are working to launch their first India-made EVs in the world's third-largest car market in 2025.

Building EVs in India would have obvious long-run strategic value for Hyundai and Kia but the underdeveloped EV manufacturing and charging infrastructure remain a challenge, said one of the sources.

Until EV sales pick up pace, Hyundai "wants to get dibs on India's hybrid market", the person said. That is why Hyundai has adopted hybrids as an interim strategy for India because it already has the technology globally, said a second source. "It has now begun work on tailoring that technology for cars in India to make it mainstream," the source said.

Local brands in India do not currently offer competitive hybrid cars in the country and the segment is dominated by Japanese rivals like Toyota Motor, said Shin Yoon-chul, an analyst at Kiwoom Securities.

"Hyundai and Kia, who have experience of building hybrids, could command that market share in India," Yoon-chul added. Toyota had 78 per cent share of India's hybrid market in 2023, market leader Maruti Suzuki had 20 per cent and Honda Motor the remaining 2 per cent, according to data from Kiwoom.

Growing Popularity

The popularity of hybrids, which are cheaper than EVs and offer fuel savings over gasoline models without the headache of charging, has grown in India since Toyota Motor launched its first mass-market hybrid SUV in 2022.

Hybrid models accounted for about 2 per cent of India's total car sales of 4.1 million in 2023. The share of EVs was just above 2 per cent, even though the first affordable model was launched by domestic company Tata Motors in 2020.

The surge in hybrid car sales comes despite a high domestic goods and services tax of 43 per cent on such models versus 5 per cent for EVs, because of their environmental benefits.

While Toyota has been lobbying the government to cut the 43% tax, carmakers like Tata and even Hyundai opposed such changes as recently as this year, saying they would hurt investments.

Hyundai is pressing ahead with hybrid plans despite the high taxes. It was not immediately clear if the carmaker would now want New Delhi to continue maintaining high taxes on hybrids or seek a reduction.

Hyundai's hybrids will allow it to better compete with rival Maruti Suzuki which sells such models in partnership with Toyota and plans more affordable launches with technology from parent Suzuki Motor.

India is Hyundai's third biggest revenue generator after the United States and South Korea. It is doubling down on the South Asian nation, where it plans a $3-billion IPO, after cutting back output in China following years of losses there, and having sold its two Russian plants.