Hybrid and CNG Cars to Outshine Electric Vehicles in India, Says UBS Report
A recent report by UBS, an investment banking firm, highlights that hybrid and CNG vehicles will be more successful than electric vehicles (EVs) in India in the medium term. Despite various incentives, launches, and price reductions, EVs hold less than 2.5% of the passenger car market, lagging behind strong hybrids.
Growth Predictions
The report forecasts that India’s passenger vehicle (PV) industry will see high-single to low-double-digit revenue growth from fiscal years 2024 to 2027. This growth will be driven by a 6-7% compound annual growth rate (CAGR) in vehicle volumes and a 3-4% CAGR in average selling prices (ASPs). The increasing popularity of SUVs is expected to fuel this demand, while entry-level cars may not see significant recovery until at least fiscal year 2026.
Two-Wheelers and Commercial Vehicles
Despite a current slowdown in demand, the report predicts a 7% CAGR for both two-wheeler (2W) and car volumes over the same period, aligning with the real GDP growth rate. The rise in popularity of 125cc two-wheelers and SUVs reflects a broader trend towards premiumization in the vehicle market. For commercial vehicles (CVs), a recovery is expected to start in the second half of fiscal year 2025, with volume growth rates projected at 1%, 8%, and 8% for fiscal years 2025, 2026, and 2027, respectively.
Future of Electric Vehicles
The report also emphasizes the pivotal role of EVs in shaping the future of the industry. It anticipates rapid adoption of EVs in the two-wheeler segment over the medium term, while the transition for passenger cars will be more gradual. By 2030, it is estimated that 40% of two-wheelers and 15% of cars sold will be electric. Currently, the total cost of ownership (TCO) for electric two-wheelers is already more favorable compared to internal combustion engine (ICE) vehicles, even with recent significant reductions in FAME-2 incentives.
Doubts Revealed
Hybrid Cars -: Hybrid cars use both a petrol or diesel engine and an electric motor to run. This helps save fuel and reduce pollution.
CNG Cars -: CNG stands for Compressed Natural Gas. CNG cars use this gas as fuel, which is cheaper and cleaner than petrol or diesel.
Electric Vehicles (EVs) -: Electric vehicles run on electricity stored in batteries. They don’t use petrol or diesel, so they don’t produce pollution.
UBS -: UBS is a big company that provides financial services like banking and investment advice. They study markets and make reports.
Incentives -: Incentives are rewards or benefits given to encourage people to do something, like buying electric vehicles. These can be discounts, tax benefits, or other perks.
Passenger Car Market -: This refers to the market for cars that people use for personal travel, not for carrying goods or passengers for money.
Revenue Growth -: Revenue growth means an increase in the money a company or industry earns over time.
SUVs -: SUV stands for Sports Utility Vehicle. These are big cars that can be used on rough roads and for carrying more people or goods.
Electric Two-Wheelers -: These are bikes or scooters that run on electricity instead of petrol. They are cheaper to run and don’t cause pollution.
