India’s Automobile Sector: Paving the Way for Sustainable Mobility

Can India lead the global race towards sustainable mobility by embracing alternative fuels?

India’s automobile sector, which contributes to 49% of India's manufacturing GDP, is at a critical juncture, transforming rapidly due to technological advancements and pressing environmental challenges. With a goal to reduce CO2 emissions by 37% by 2030 and decrease reliance on oil imports (currently at 80%), the industry is innovating and investing in sustainable practices.

India’s automobile sector has witnessed remarkable growth, evolving from a closed market with five players until 1982 to selling approximately 2 crore vehicles in 2023-24. Now boasting the third-largest vehicle population globally, with over 300 million registered vehicles. The sector received a cumulative equity FDI inflow of about US$ 36.268 billion between April 2000 - March 2024.

The industry has an annual growth rate of 8-10%. The key players in this industry are Maruti Suzuki India Limited (48.25% market share), Hyundai Motor India Ltd. (16.41%), and Tata Motors (13.1%) dominate the passenger vehicle market, while Mahindra Group (7.24%) leads in SUVs, and Hero MotoCorp (34%) in two-wheelers.

Government initiatives have been instrumental in pushing towards the transformation of the industry, the major ones being:

• FAME II Scheme: With a budget of ?10,000 crore, this scheme incentivizes electric vehicle (EV) adoption and infrastructure development
• 20% Ethanol Blending by 2025: This initiative aims to reduce reliance on fossil fuels by blending ethanol with petrol (15.3% as of May 2024) and support the agricultural sector by utilizing sugarcane as a feedstock

The shift is being aimed at alternative fuels and technologies including:

• Biofuels: Gaining traction as viable alternatives to fossil fuels. Ethanol-blended petrol engines can run on any blend of petrol and ethanol up to 83%. TOYOTA TSUSHO INDIA PVT LTD 's Innova, launched in August 2023, runs on 100% bioethanol. Biodiesel mandates for the B5 blend are in place, with targets for B10, using feedstocks like Jatropha, Pongamia, and used cooking oil.
• Hydrogen Fuel Cell EVs (HFCEVs): India is assessing hydrogen fuel cell technology through pilot projects that offer zero tailpipe emissions. Models like Toyota Mirai and Hyundai Nexo lead this technology.
• CNG and BioCNG: Widely used in public transport, with cities like Delhi and Mumbai leading adoption. BioCNG, derived from biomass, is gaining momentum. Indore is a successful example of BioCNG implementation from municipal solid waste.
• EVs: Significant traction in urban areas, with electric buses for public transport and companies like 亚马逊 , Flipkart , Ola Electric , and Uber integrating electric three-wheelers into logistics fleets. Models like the Tata Nexon EV are popular among private owners. 70% of India’s top-tier car buyers consider EVs for their next purchase.

Challenges

• Infrastructure Development: With 12,146 public EV charging stations as of February 2024, India is far from the 50,000 needed by 2030. Rural areas face even greater deficits.
• Technology and R&D Investment: India needs substantial R&D investments to create cost-effective, high-performance batteries and develop efficient biofuels, biodiesel, and BioCNG technologies.
• Policy and Regulatory Hurdles: Regulatory inconsistencies between states create a fragmented market. Harmonizing these policies is crucial for a cohesive national strategy.
• Economic Constraints: The higher initial cost of EVs and HFCEVs compared to traditional vehicles is a significant barrier. Startups often struggle to secure funding.
• Consumer Awareness and Acceptance: Educating consumers about the benefits of alternative fuels and addressing misconceptions about range anxiety, battery life, and safety is necessary.

Opportunities

• Market Growth Potential: The Indian EV market is projected to grow at a 44% CAGR from 2020 to 2027, potentially reaching over 10 million EVs by 2030. The global biofuel market, expected to hit $153.8 billion by 2026, offers significant export opportunities for India.
• Technological Innovation: Investment in R&D for next-generation battery technologies and hydrogen fuel cells can reduce costs and improve performance. Collaborations with global leaders like Toyota and Hyundai can accelerate advancements.
• Sustainable Economic Growth: Transitioning to alternative fuels and EVs can create millions of jobs in manufacturing, infrastructure, R&D, and maintenance. Reducing oil imports enhances energy security while diversifying with domestic renewable resources strengthens economic resilience.
• Environmental Benefits: Alternative fuels and EVs can significantly reduce greenhouse gas emissions and improve air quality, aiding public health and meeting climate commitments. Utilizing agricultural waste for biofuel production supports sustainable farming and provides additional income for farmers. The widespread adoption of EVs could potentially reduce India’s carbon dioxide emissions by 1 gigatonne by 2030.

The future of India’s automobile industry is geared towards achieving sustainable mobility through extensive adoption of alternative fuels. For example, Ola Electric IPO is the first auto company in India to launch an IPO in over two decades (20 years), which validates the growth of the industry.

The automobile sector accounts for 8% of the country's R&D spending. Thus, the global biofuel market presents significant export opportunities, which India can capitalize on by expanding its production capabilities. Investment in next-generation battery technologies and hydrogen fuel cells will not only reduce costs but also improve vehicle performance and reliability. Collaborations with international leaders in the automotive sector are anticipated to accelerate India’s transition towards greener alternatives. Moreover, the industry’s shift towards alternative fuels is poised to create millions of new jobs, enhancing economic resilience and reducing dependence on oil imports.

Therefore, India is well-positioned to achieve its ambitious sustainability goals and set a global benchmark for environmentally friendly transportation solutions.