Hyundai Motor Group plans to launch its first hybrid cars in India as early as 2026, three Reuters sources said, as it shifts strategy to look beyond electric vehicles and boosts its presence in a key market.

The group, comprising Hyundai Motor and Kia Corp, is evaluating a hybrid sport-utility vehicle of size similar to its top selling, mid-sized Creta SUV in India, two of the news agency sources, with direct knowledge of the plans, said.

Hyundai, India’s second largest carmaker, and Kia were targeting the launch of hybrid SUVs in 2026 or 2027, the two sources said, adding EV plans for India were also on track.

In a statement on Tuesday, Hyundai Motor Group told Reuters it was “committed to a future of electrified mobility and will optimise product strategies for each market”.

The news agency said the pivot to hybrids came as Hyundai saw a surge in sales of the technology in India, prompting it to shift away from an initial strategy that focused only on battery electric vehicles.

Hyundai and Kia, which now sell only petrol and diesel cars and imported EVs such as the Ioniq 5 and EV6, respectively, are working to launch their first Indian made EVs in the world’s third-largest car market in 2025.

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Building EVs in India would have obvious long run strategic value for Hyundai and Kia but the underdeveloped EV manufacturing and charging infrastructure remained a challenge, one of the Reuters sources said.

Until EV sales pick up pace, Hyundai “wants to get dibs on India’s hybrid market”, the source said.

That was why Hyundai had adopted hybrids as an interim strategy for India because it already has the technology globally, said a second source.

“It has now begun work on tailoring that technology for cars in India to make it mainstream,” the Reuters source said.

Local brands in India do not currently offer competitive hybrid cars in the country and the segment is dominated by Japanese rivals like Toyota, Shin Yoon-chul, an analyst at Kiwoom Securities, told Reuters.

“Hyundai and Kia, who have experience of building hybrids, could command that market share in India,” Yoon-chul added.

Toyota had 78% share of India’s hybrid market in 2023, market leader Maruti Suzuki had 20% and Honda Motor the remaining 2%, according to data from Kiwoom cited by Reuters.

The popularity of hybrids, which are cheaper than EVs and offer fuel savings over petrol models without the headache of charging, has grown in India since Toyota Motor launched its first mass market hybrid SUV in 2022, the report said.

Hybrid models accounted for about 2% of India’s total car sales of 4.1m in 2023. The share of EVs was just above 2%, even though the first affordable model was launched by domestic automaker Tata Motors in 2020.

The surge in hybrid car sales came despite a high domestic goods and services tax of 43% on such models versus 5% for EVs, because of their environmental benefits, Reuters said.

While Toyota had been lobbying the government to cut the 43% tax, carmakers like Tata and even Hyundai opposed such changes as recently as this year, saying they would hurt investments.

Hyundai was pressing ahead with hybrid plans despite the high taxes, Reuters said, adding it was not immediately clear if the carmaker would now want New Delhi to continue maintaining high taxes on hybrids or seek a reduction.

Hyundai’s hybrids would allow it to better compete with rival Maruti Suzuki which sells such models in partnership with Toyota and plans more affordable launches with technology from parent Suzuki Motor, Reuters said.

India is Hyundai’s third biggest revenue generator after the United States and South Korea.

It was doubling down on the South Asian nation, where it planned a US$3bn IPO, after cutting back output in China following years of losses there, and having sold its two Russian plants, the news agency noted.