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Global carmakers line up hybrid cars for India, but price still a hurdle

Toyota Camry hybrid will soon be joined by Honda Accord and Nissan X-trail hybrid models, but slow sales will offset the benefit of govt subsidy on clean technology cars

At least half-a-dozen hybrid cars will hit Indian roads over the next 18 months. Photo: Bloomberg
At least half-a-dozen hybrid cars will hit Indian roads over the next 18 months. Photo: Bloomberg

Mumbai: When Abhay Savargaonkar, director of technology and chief technology officer at Bharti Airtel Ltd, bought a car two-and-a-half years ago, he chose Toyota’s hybrid Camry although he could have purchased a luxury automobile with higher snob value for the Rs34 lakh he paid for it.

Savargaonkar said he was impressed by the hybrid’s promise of clean technology and lower fuel consumption. More than anything else, he bought it for peace of mind, he said. “Burning of fuel when the car is idling for a long time in a traffic jam is a big irritant and stressful,” he said. “This worry is taken care of by a hybrid.”

Customers like him will soon have more choice. At least half-a-dozen hybrid cars will hit Indian roads over the next 18 months as automakers seek to tap aspirational, upwardly mobile Indians who don’t balk at paying a premium for clean technology. A government subsidy and the likely introduction of a goods and services tax (GST) from April that will make such cars cheaper is encouraging the hybrid-car push.

Honda Cars India Ltd is set to launch the Accord hybrid on 25 October to “showcase world class technology,” says Jnaneswar Sen, senior vice president at the automaker. Honda discontinued the premium Accord sedan in 2013 after tepid response from customers. It has no plans to relaunch the regular internal combustion engine (ICE) variant of the model.

Unlike its rival Toyota, which locally assembles the Camry hybrid, Honda will import the car from Thailand. Initially, it plans to import around 30 units in the first lot. Since it will be an imported car, it will not qualify for government subsidy under the FAME (faster adoption and manufacturing of electric and hybrid vehicles) scheme.

The subsidy is governed by the kind of hybrid technology being used. While a so-called mild hybrid—a Maruti Suzuki Ciaz, for example—enjoys a subsidy of Rs13,000, a full, locally assembled hybrid model like the Toyota Camry gets a benefit of up to Rs70,000.

The sales volumes expected, said Honda’s Sen, are at too small to justify local assembly. The imported model will not get government subsidy, but will attract lower excise duty and lower value-added tax in Delhi than cars fitted with an internal combustion engine. Sen said this will help the firm price the car competitively in Delhi—its most important market.

N. Raja, senior vice-president and director of marketing and sales at Toyota Kirloskar Motor Pvt. Ltd, says that with stricter emission standards looming, hybrids are the way to go.

“After the success of the hybrid Camry, we are studying the possibility of getting more hybrid models from our global portfolio,” he said. Camry hybrid sales jumped to 1,100 units in the first nine months of the current calendar year from 700 units in all of 2015. Local assembly has helped Toyota to limit the price gap between the hybrid and regular models to around Rs3.25 lakh.

Encouraged by the response to its plug-in hybrid model Volvo XC 90 (priced at Rs1.25 crore), for which it has received 50 bookings since its launch on 14 September, Volvo Cars India Pvt. Ltd, the local unit of the Swedish carmaker, plans to launch a hybrid variant for most of the cars it will sell in India, said Tom Bonsdorff, managing director.

The local arm of Nissan Motor Co also plans to bring the X-Trail hybrid to India in the first half of next year, said a company spokesperson.

Kavan Mukhtyar, a partner at consulting firm PricewaterhouseCoopers, says the share of hybrid cars in India is set to accelerate, backed by increasing consumer awareness and the government push. Clean technology is also emerging as a key differentiator among premium car buyers.

For the companies, “it’s more about an image statement,” he said.

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