Step aside Tesla, BYD: Japanese carmakers deepen their hold on India's auto market with hybrids

Hello, this is Priyanka Salve, writing to you from Singapore.

Welcome to the latest edition of“Inside India“— your one-stop destination for stories and developments from the world’s fastest growing large economy.

Indian consumers’ desire to shift away from gasoline-based cars should have been Tesla and BYD’s moment to shine in the world’s third-largest auto market. But legacy carmakers that have dominated the Indian market for decades have an ace up their sleeve — hybrid cars.

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The demand for electric vehicles is surging worldwide, but Indian consumers are choosing a different ride — hybrid cars that don’t need external charging.

Hybrid cars are expected to reach 10% of total car sales in India in the financial year ending March 2027, while EVs are expected to account for 5%, according to a report by Indian research firm Care Ratings.

Cost-conscious consumers who were previously buying diesel vehicles have started shifting to hybrids, Puneet Gupta, director at S&P Global Mobility with a focus on the Indian market,told CNBC.

Hybrid vehicle sales have risen nearly fourfold in the world’s third-largest auto market to 362,866 units in the financial year ending March 2026, from 98,010 units in the financial year ending March 2020, according to Care Ratings.

Meanwhile, annual sales of electric vehicles were 131,865 units in the year to March 2026, the report, based on the Indian government’s vehicle registration data, showed.

“It’s clear that hybrid cars are gaining traction [in India] faster than EVs in the passenger car segment,” Diwakar Murugan, senior automotives analyst at Omdia, said in an email to CNBC. He added it was “remarkable” that hybrids are punching above their weight, having achieved strong growth with just eight models in the market so far, compared to more than 40 EV models.

The shift away from internal combustion engine, or ICE, vehicles should have ushered global EV companies like Tesla and BYD into India, but it turns out that Japanese manufacturers, who already dominate India’s auto space, are set to deepen their grip on the market by offering hybrid cars instead of pure EVs.

Tesla has sold fewer than 400 cars while BYD has sold less than 7,000 in India since 2025, according to government data.

Even in the EV space, automakers Mahindra & Mahindra and Tata Motors, which primarily sell ICE cars, are the leading players. That’s a stark contrast to BYD and Tesla’s global dominance: in 2025, BYD became the world’s top EV seller with 2.26 million units, while Tesla sold 1.64 million.

In hybrids, Japan’s Toyota and Maruti Suzuki — the Indian subsidiary of Suzuki Motor — are the top manufacturers in India, with popular models including the Toyota Innova Hycross and Maruti Grand Vitara, said Arun Agarwal, vice president of fundamental research at Indian brokerage Kotak Securities.

These companies already dominate the broader Indian auto market, where the majority of their sales constitute ICE vehicles.

Maruti Suzuki leads auto sales with more than 1.8 million cars sold in the 12 months ended March 2026, as per data from auto industry body the Society of Indian Automobile Manufacturers, including 20,466 strong hybrids, as per data shared by S&P Global Mobility.

Japanese-Indian joint venture Toyota Kirloskar Motors sold 366,896 cars, with 91,536 strong hybrids during the same period.

Hybrid cars come in mild and strong variants depending on their battery capacity. Unlike mild hybrids, strong hybrids can drive solely on electric power — for short distances at low speeds — resulting in better fuel efficiency.

Given the increasing customer acceptance, experts said that over the next 12 months, more hybrid car launches are expected than in the last five years combined.

“Hybrids don’t require any behavioral change as consumers refuel at a petrol pump, just like they always have,” said Murugan, adding that hybrids offer better mileage without the range anxiety of EVs.

Experts told CNBC that this trend is likely to sustain, as many leading car companies in India are launching new hybrid models this year, attracting buyers looking for better fuel efficiency. Meanwhile, EV adoption in the country suffers from a lack of adequate charging infrastructure, limited access to affordable global EVs, and anxiety about resale value, Gupta said.

Hyundai and Kia, French carmaker Renault, Honda and Maruti Suzuki are all planning to launch new hybrid models for the Indian consumer, analysts said.

Meanwhile, despite a warming of ties between India and China and a trade deal between New Delhi and Washington, both Tesla and BYD await their share of the world’s third-largest auto market as they continue to face sky-high duties.

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