India’s automobile sector stands at a pivotal juncture as it embraces the electric vehicle (EV) revolution. With EVs now representing approximately 7.5 percent of vehicle sales, the industry is rapidly evolving. New manufacturing plants and an array of EV models are being introduced across the nation. As the Union Budget approaches, discussions surrounding stringent fuel-efficiency norms and compliance costs are intensifying. Policymakers and industry leaders are now prioritizing the advancement of clean mobility.
The Overlooked Challenge
While electric cars are nearing cost parity with traditional petrol vehicles, prompting a shift in consumer demand, the manufacturing emissions associated with vehicle production remain largely unaddressed. The focus has predominantly been on tailpipe emissions, but the manufacturing phase—encompassing emissions from steel, rubber, and electricity-intensive processes—demands equal attention. For India to maintain its competitive edge and fulfill its net-zero commitments amid global carbon-sensitive trade dynamics, decarbonization of vehicle manufacturing must transition from a peripheral issue to a central strategy.
Emissions Breakdown
The Indian automobile industry contributes around 7.1 percent to the national GDP and plays a vital role in driving industrial growth and job creation. Currently, 65-80 percent of a vehicle’s emissions arise from its tailpipe, but electrification is progressively diminishing this share. However, the emissions generated through the production processes, particularly from steel and rubber manufacturing, are substantial. For example, the steel used in a single car can release approximately 2.2 tonnes of CO₂. To substantiate India’s net-zero ambitions, it is imperative to decarbonize vehicle manufacturing comprehensively.
Projected Growth and Emissions
In a business-as-usual scenario, vehicle production in India is expected to rise significantly. Projections indicate that four-wheeler ownership will leap from approximately 34 per 1,000 people to 201 by 2070. Interestingly, two-wheeler ownership is projected to peak at 108 in 2050 before declining to 85 as income levels rise and consumers shift towards cars. With increasing freight demand, truck production will also surge. As a result, energy demand for vehicle manufacturing is anticipated to more than triple between 2020 and 2050, with emissions soaring from 30.3 million tonnes of CO₂ in 2020 to an estimated 64 million tonnes by 2050.
Emission Sources and Decarbonization
In 2020, direct emissions from manufacturing (Scope 1) represented a mere 1 percent of total emissions, while indirect emissions from purchased electricity (Scope 2) accounted for 16 percent. The lion’s share, 83 percent, originated from Scope 3 emissions linked to the upstream supply chain, particularly in steel and rubber production. To effectively decarbonize vehicle manufacturing, a holistic approach is necessary—this includes improving factory operations, transitioning to renewable energy sources, and addressing emissions from material inputs.
Strategies for Reduction
Prominent automakers such as Mahindra & Mahindra, Tata Motors, and Ford are setting ambitious targets to reduce their Scope 1, 2, and 3 emissions by 2030-2050, aligning with global net-zero objectives. A recent study has highlighted that transitioning to green electricity and low-carbon steel could reduce emissions from India’s automobile sector by up to 87 percent. However, mitigating Scope 3 emissions poses significant challenges, particularly as many suppliers, especially in the micro, small, and medium-sized enterprises (MSME) sector, operate with limited resources.
Key Focus Areas
Renewable Electricity Procurement
By 2050, the automobile industry’s annual electricity demand is projected to reach approximately 54 TWh. Achieving a 100 percent renewable energy supply is essential for reducing Scope 2 emissions. This necessitates the establishment of around 34 GW of renewable energy capacity to power OEM factories. Early planning and collaboration with regulators and renewable developers will be crucial for successful procurement.
Green Steel Production
Decarbonizing the supply chain hinges on the adoption of green steel, a challenging yet vital component. Although currently more expensive, increased demand can lead to economies of scale and cost reductions. Automakers should engage in Advance Market Commitments (AMCs) to secure green steel, progressively aiming for 100 percent utilization by 2050.
Other Material Considerations
Electrifying production processes for materials like rubber can significantly reduce emissions, provided the electricity used is renewable. OEMs need to collaborate closely with suppliers to facilitate access to clean electricity and funding for low-carbon technologies.
Addressing Cost Concerns
The transition to a net-zero future raises concerns about costs, especially in a price-sensitive market like India. Estimates suggest that the price of green steel could be around 35 percent higher, potentially increasing vehicle prices by 2-5 percent in inflation-adjusted terms. However, this must be viewed in context; India’s per capita income is expected to quadruple by 2050. Thus, the modest price increase may have a negligible effect on demand. The long-term advantages—improved air quality, resilient supply chains, and enhanced export competitiveness—will far surpass any short-term costs.
Conclusion
As the global marketplace shifts towards carbon border taxes and green procurement standards, only businesses with low-emission supply chains will thrive. By prioritizing decarbonization efforts within manufacturing, India’s automobile industry can not only contribute to clean mobility but also position itself as a key player in the country’s low-carbon transition. Embracing this challenge will lead to sustainable growth and a cleaner environment for future generations.
- Takeaways:
- Emissions from vehicle manufacturing must be addressed alongside tailpipe emissions.
- Significant growth in vehicle production will dramatically increase energy demand and emissions.
- Collaboration with suppliers is essential for accessing clean technologies and green materials.
- Long-term benefits of decarbonization will outweigh short-term cost increases.
- India’s auto industry can drive the nation’s low-carbon transition by focusing on sustainable practices.
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