Affordability keeps ICE relevant as buyers warm to hybrids: Study

Hybrids emerge as the preferred bridge technology as most buyers stay price-conscious, favour lower EMIs and take a cautious view on full electrification

Affordability, rather than technological enthusiasm, is the primary driver for Indian car buyers. Over half of consumers refuse to spend beyond Rs 15 lakh, often opting for longer loan tenures to manage costs. Consequently, internal combustion engine (ICE) vehicles remain the market anchor, while hybrids have emerged as the leading transition pathway, according to Deloitte’s Global Automotive Consumer Study.

 

“Powertrain choices mirror this pragmatism. ICE remains the anchor, with hybrids strengthening their position as the preferred transition pathway,” Rajat Mahajan, partner and automotive sector leader at Deloitte India, told Business Standard.

 

Battery electric vehicles (BEVs) still form a small base — around four per cent of passenger vehicle sales.

   

Nearly 10 per cent of respondents prefer a BEV for their next purchase, signaling building latent demand. However, hybrid preference significantly outstrips current market penetration, highlighting an underserved segment requiring closer policy attention. Deloitte expects ICE hybrid, and BEV technologies to coexist for the foreseeable future.

 

Cost outweighs technology ambition across all segments. Nearly half of buyers refuse to exceed the Rs 15 lakh bracket and almost 50 per cent intend to finance their purchase — the highest proportion among major global markets. Increasingly, consumers are opting for longer loan tenures to soften EMIs, highlighting persistent price sensitivity despite rising expectations for advanced features.

 

This emphasis on affordability also explains why EV interest in India is driven more by operating economics than environmental considerations.

 

Original equipment manufacturers (OEMs) admit that EV penetration is low in the segment where volumes lie.

 

“Below Rs 12 lakh, the EV market is negligible,” said Shailesh Chandra, managing director of Tata Motors Passenger Vehicles and Tata Passenger Electric Mobility, recently.

 

In the sub-Rs 12 lakh segment, where over 3 million passenger vehicles (PVs) are sold annually, EV penetration languishes at 1.5 per cent. That is in contrast to the above-Rs 12 lakh segment, where EV adoption has hit 10 per cent. “We have been very committed to the entry EV segment because 65 per cent of demand lies there. Unless we crack this segment, EVs will not become mainstream in India. That is why this phase is so critical in the evolution of electric vehicles in the country,” Chandra had told reporters.

 

Public charging availability, charging time and battery concerns dominate consumer anxiety, making home charging the preferred choice for most EV intenders, according to the Deloitte study.

 

Mahajan noted that this preference will clash with urban realities such as dense housing and limited parking. “The adequacy of EV charging remains a structural challenge, despite the rapid expansion of charging infrastructure in India,” he said. As public charging networks mature and the EV-to-public-charger ratio improves, consumer preferences could gradually shift towards shared or public charging solutions, particularly in dense urban areas where private chargers are less feasible.

 

Digital public infrastructure is already influencing behaviour. QR code and UPI-based payments are the most preferred modes for public EV charging.

 

Beyond powertrains, the study highlighted how software and connected features are shaping purchase decisions. About 84 per cent of consumers are likely to keep vehicles longer if over-the-air updates enhance the experience, though Mahajan cautioned this may not necessarily slow replacement demand.

 

“Rather than dampening demand, this creates an opportunity for OEMs to differentiate through continuous software-led enhancements,” he said. Such updates open up high-margin revenue streams, including monthly subscriptions, while also improving service retention and customer lifetime value for manufacturers and dealers.

 

Indians are willing to pay for safety-led features like emergency assistance and anti-theft tracking, yet data privacy concerns remain high. Between 70 per cent and 73 per cent of respondents are uncomfortable sharing location, biometric, and in-cabin data, highlighting a growing tension between digital convenience and trust.

 

Buying a car is becoming increasingly digital-first, with social media, influencers and OEM websites driving research and shortlisting. However, physical test drives and pricing transparency remain critical at purchase, while dealerships maintain the highest trust for servicing and long-term relationships despite the shift toward software-defined vehicles.