The move is aimed at meeting stricter fuel efficiency norms to be introduced from 2022 and pushing robust hybrid technology into the domestic market, said the people cited above.
“Diesel engine option for the next replacement of Innova seems off the cards right now. Toyota will develop the next generation of the Innova with the hybrid system and given the stricter emission and fuel efficiency norms this strategy makes perfect sense," said the first person cited above. “Toyota’s portfolio is very diesel-heavy and this will also help Toyota push its hybrid technology in India".
They said the next generation model of the Innova is expected to be introduced in either 2021 or 2022. The vehicle is currently offered with options of petrol and diesel engines, though diesel makes up bulk of the sales.
“As a policy, Toyota does not comment on future product plans, and hence, we would like to refrain from commenting on the same," said a spokesperson of Toyota Kirloskar Motors.
India will implement the second phase of the corporate average fuel efficiency (CAFE) norms and Real-World Driving Emissions test in 2022 and 2023, respectively.
To be sure, Toyota currently sells the Camry and Prius sedans with petrol hybrid engines in India but their volumes are low.
Puneet Gupta, associate director, IHS Markit said Toyota appears to be reorienting its India strategy in line with upcoming regulations like Bharat Stage VI and CAFE norms. “The product mix going forward will be important as it will decide the fate of many vehicles and fuel mix among these vehicles," he said.
“It is expected that Toyota’s focus will be to push hybrids in India even in their bigger vehicles and try to exit diesel in mass segment vehicles. This is just to align to expectations of Indian consumers who want more mileage at minimum additional price for their cars. Toyota like other vehicles manufacturers is expected to focus on gasoline and hybrid combination in their vehicles even in C-segment," Gupta said.
Automakers are expected to stop offering diesel engines on hatchbacks and compact sedans with the implementation of BS-VI norms from April 2020. This is because BS-VI compliant vehicles are expected to be ₹1-1.5 lakh costlier than current BS-IV models, which will hit demand in the price-sensitive small car segment.
The companies are, however, expected to continue offering diesel models, especially in the utility vehicle segment, with engines bigger than 1.5 litre.
If Toyota decides to move away from diesel engines on the Innova, it would indicate a clear shift in strategy of vehicle manufacturers in bigger vehicles as well. The Innova is Toyota’s most popular model in India. Sales of the Innova fell 6% to 74,137 units in FY19 amid a slowdown in the domestic automobile market.
Toyota is already preparing for its eco-friendly journey in India. Denso Corp., a Toyota unit, along with Suzuki Motor Corp. and Toshiba Corp. have invested in a manufacturing capacity for lithium-ion batteries in Gujarat. Both Toyota and Suzuki have also invested in manufacturing affordable electric and hybrid vehicles for the Indian market.