Electric vehicles may soon face tough competition from 'strong hybrid' segment

Mumbai: Electric vehicles (EVs) have been the stars of the automotive market of late, but they may soon face competition from the ‘strong hybrid’ segment, which is fast picking up pace. Strong hybrid vehicles have an electric motor as well as an internal combustion engine (ICE), which can work together as well as independent of each other.

EV sales jumped by 131% year-on-year during January-July this year, from 25,100 to 58,076 units, but strong hybrid sales outshone, with more than 3,100% growth from 1,467 to 47,124 units. Meanwhile, ICE vehicles saw just 5% growth, albeit for a total of 2.2 million units from 2.1 million in the year-ago period, according to data collated by Jato Dynamics.

Industry experts say the passenger vehicle market is clearly splitting into four sub-segments, with electric, strong hybrids and compressed natural gas (CNG) seeing the most growth, even as expansion in traditional fuel vehicles slows down.

This fragmentation has led to different companies emerging as leaders in each segment. Tata Motors, followed by MG Motor, leads in EVs; Toyota Kirloskar and Maruti Suzuki performed best with strong hybrids; and Maruti Suzuki in CNG and internal combustion engine vehicles.

Maruti Suzuki senior executive director Shashank Srivastava expects 15% of the portfolio for the country’s largest carmaker to be electric by 2030, with 25% strong hybrids and 60% a mix of petrol, CNG, biofuels and flexi-fuels.

At the moment, CNG vehicles account for 26% of Maruti sales, with strong hybrids at 1%. The company doesn’t have any electric models as of now, so the balance comprises ICE models.

Customers are starting to prefer electric and hybrid vehicles because of their lower running costs. Additionally, regulatory nudges – the Indian government has set a target of 30% EV contribution to sales across vehicle segments by 2030 – are pushing manufacturers to launch more models in these segments. “We follow customer preferences,” said Srivastava.

Since the supply chain, battery costs and charging infrastructure have to significantly improve before fully-electric cars can take off, “strong hybrids are an excellent bridge to future and convenient choice with benefits,” said Ravi Bhatia, president, Jato Dynamics. The likes of Toyota and Maruti Suzuki are pitching strong hybrids to retail as well as fleet customers, who want more sustainable transportation options but may not be ready to make the shift to fully battery-powered vehicles, Bhatia added.