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, more than technology enthusiasm, is shaping how Indian consumers approach their next car purchase, with internal combustion engine (ICE) vehicles continuing to anchor demand and hybrids emerging as the preferred transition option, according to Deloitte’s latest Global Automotive Consumer Study.

 

Over half of prospective buyers — around 51 per cent — said they would not stretch beyond the Rs 15 lakh price bracket. Nearly half intend to finance their next vehicle through loans, the highest proportion among major global markets, with longer tenures increasingly used to manage equated monthly instalments (EMIs).

 

“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.

   

EV demand remains limited

 

Battery electric vehicles (BEVs) account for about 4 per cent of passenger vehicle sales. Around 10 per cent of respondents indicated a preference for a BEV as their next vehicle, suggesting latent demand, though current penetration remains low.

 

Hybrid preference far exceeds current market share, indicating a potentially underserved segment. Deloitte expects ICE vehicles, hybrids and BEVs to coexist in the foreseeable future.

 

Industry executives acknowledge the challenge of scaling EVs in the mass segment. Shailesh Chandra, Managing Director of Tata Motors Passenger Vehicles and Tata Passenger Electric Mobility, recently noted that EV penetration in the sub-Rs 12 lakh segment — where more than 3 million vehicles are sold annually — stands at just 1.5 per cent. In contrast, adoption in the above-Rs 12 lakh segment has reached 10 per cent.

 

“Unless we crack this segment, EVs will not become mainstream in India,” Chandra said.

 

Consumer concerns around public charging availability, charging time and battery reliability continue to weigh on EV adoption. Home charging remains the preferred option, though Mahajan cautioned that dense urban housing and limited parking could constrain this model.

 

“The adequacy of EV charging remains a structural challenge, despite rapid expansion,” he said, adding that improvements in the EV-to-public-charger ratio could gradually shift preferences towards shared charging solutions.

 

Software and digital shift

 

Beyond powertrains, software and connected features are increasingly influencing purchase decisions. About 84 per cent of consumers said regular over-the-air (OTA) updates would make them more likely to retain a vehicle longer.

 

Mahajan said this trend could open high-margin subscription opportunities for original equipment manufacturers (OEMs) rather than dampen replacement demand. However, data privacy remains a concern, with 70–73 per cent of respondents uncomfortable sharing location, biometric or in-cabin data.

 

The buying journey itself is becoming digital-first, driven by social media, influencer reviews and OEM websites. Yet physical test drives and dealership relationships remain critical at the point of purchase and servicing.

 

Overall, the study underscores that price sensitivity and operating economics — rather than environmental considerations — continue to dominate India’s automotive demand, keeping ICE vehicles and hybrids firmly in the driver’s seat for now.