In the absence of any tax sops for hybrid vehicles compared to just 5 percent GST for EVs, the Korean carmaker feels there is little business sense in launching them in India.
21 Jul 2022 | 5941 Views | By Mayank Dhingra
On July 13, Hyundai Motor India (HMI) unveiled the latest generation of its flagship SUV, the 2022 Tucsonwhich will be brought to India as a completely-knocked-down unit from South Korea and be assembled at the plant in Chennai starting August. The company which sells the SUV’s hybrid variant in ...
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On July 13, Hyundai Motor India (HMI) unveiled the latest generation of its flagship SUV, the 2022 Tucson which will be brought to India as a completely-knocked-down unit from South Korea and be assembled at the plant in Chennai starting August. The company which sells the SUV’s hybrid variant in overseas markets has no plans to offer it here.
"All these technologies have significant benefits, but they come at a cost. It only makes sense to introduce such models once the benefits are there in terms of taxation, which are very clearly there for electric vehicles (EVs) with their GST being at only 5 percent," said Tarun Garg, director, Sales Marketing and Service, HMI.
As Garg puts it, "We view every market in line with the local government policies, and as far as the Central government is concerned, be it in terms of offering GST benefits or other incentives, the support generally seems aligned towards EVs, as of now," he added.
Hyundai’s fourth-generation Tucson SUV will continue to offer 2.0-litre petrol as well as diesel engine options - both ready to meet the upcoming real driving efficiency (RDE) norms - but will skip on the petrol-hybrid powertrain.
Tighter emission norms
India’s automotive industry is now getting ready to meet the ever-tightening emission norms, right from the BS IV to BS VI shift, to moving to the second phase of the corporate average fuel economy (CAFE) standards from April 2022, to the proposed RDE in April 2023. This is collectively putting pressure on manufacturers to go green by introducing some kind of hybrid or electric propulsion options, whilst gradually targeting full electrification.
While competition from rivals like Maruti which has completely exited diesels and is betting big on CNG as well as mild- and strong-hybrid powertrains, with the latter sourced from alliance partner Toyota, HMI says it too has access to all technologies, be it hybrid, electric or even fuel cell for that matter, but maintains that it will go by the play book of the local market.
EVs of the future
The Haryana state government which recently unveiled its EV policy is the first state in the country to specifically park benefits for hybrids. However, Garg believes, the larger trend and majority of State policies throughout the country, are in favour of more mainstream EV technology. "That's the reason why we have revealed our roadmap of introducing six battery-electric vehicles in India by 2028, beginning with the flagship Ioniq 5 slated for an India launch later this year."
"Along with petrol, diesel and CNG, this should give a very good range of options to our customers for the foreseeable future. Moreover, we will also introduce EVs in the lower end of the spectrum as well," Garg said.
The flagship Tucson aside, it remains to be seen how the market responds to Hyundai's strategy with the arrival of the SUV twins from Maruti and Toyota in the midsize SUV segment. Both offer mild and strong hybrid options to take on the best-selling Creta. While the Toyota Urban Cruiser Hyryder was unveiled on July 1, Maruti Suzuki revealed the Grand Vitara on July 20. Both SUVs lack a diesel engine, which could very well mean advantage Creta.
With the hybrid option out of its purview, Hyundai is now aggressively looking to make gains with its CNG vehicle portfolio that currently comprises the Grand i10 Nios and Aura compact sedan. Although it remains a strong player in the diesel market, it could be said that like Maruti, which has successfully managed to bridge the diesel gap in its portfolio with CNG power, Hyundai too could be looking to employ a similar strategy. Tatas have also thrown their hat into the ring with CNG launches of the Tigor and Tiago, and that too in the high-end variants.
CNG under threat?
However, consistent hikes in CNG prices may well pose a threat to this green fuel option. CNG prices in Maharashtra, one of the states where CNG availability is fairly widespread, have moved northwards by 62 percent in the last 18 months, with the latest hike on July 13 taking the price of this eco-friendly fuel up by Rs 4 per kilogram. In Mumbai, CNG prices have gone up from Rs 49.40 per kilogram in February 2021 to Rs 80 per kilogram in July 2022.
Despite the government's efforts to aggressively expand the CNG network in the country, with plans to open 4,500 more pumps by 2025, the price differential between petrol-diesel and CNG is diminishing by the day. As on July 20, CNG was Rs 31.35 per kilogram cheaper than petrol and Rs 17.28 per kilogram cheaper than a litre of diesel in Mumbai. With the narrowing gap and the higher upfront cost of factory-fitted CNG variants, and higher servicing costs, buyers may well be deterred from opting for CNG. As Garg says, “There's not a single solution for everything, and there has to be choice for every customer. CNG still offers tremendous value for the entry-level customer owing to its significantly-higher fuel efficiency compared to petrol."
Even today, CNG sales are quite high. From being pegged at average monthly sales of 3,000 units a month in the first half of CY2021, HMI's CNG sales crossed the 5,000-unit mark for the first six months of 2022. The company says it is eyeing monthly volumes of 6,000 units in the remaining half of the calendar.
But, while a decline in CNG sales would give an impetus to petrol and diesel options, keeping the customer in the Hyundai portfolio, "a rise in CNG prices always brings in challenges, and this is something we really need to watch out for," Garg said.
The Society of Indian Automobile Manufacturers (SIAM) too has voiced its concerns about high CNG prices. On July 13, Rajesh Menon, DG, SIAM said, “Recently the government has taken significant measures to ease the inflationary pressure and help the common man by reducing central excise duty on petrol and diesel and changing the duty structure to moderate prices of steel and plastic. The Indian automobile industry appreciates and thanks the government for these efforts. Industry also keenly looks forward to similar support on CNG prices which have seen exponential increase in the last seven months. Support on CNG prices would help the common man, facilitate public transport and will enable a cleaner environment.”
While the petrol-diesel-CNG powertrain strategy will play out for the next few years along with new products across segments, Hyundai will be readying its six-pack mission of electric mobility, which currently stands limited to the Kona EV.
Nonetheless, competition in India’s PV market is fierce and a resurgent Tata Motors is hard on Hyundai's heels, vying for the No. 2 spot. The Korean carmaker will clearly have to up the ante on a number of fronts to protect its position, and also make new gains.
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