Indian Car Manufacturers Need to Adapt to Electric Vehicle Revolution
Widespread adoption of electric vehicles (EVs) in India presents both opportunities and significant challenges for the country’s automotive industry and its power infrastructure, according to a recent report from Imperial College Business School. The report emphasizes that Indian automotive companies must adapt to survive the shift towards EVs.
If EVs account for 25% of all vehicles sold in India, the report suggests that major automakers could face financial risks if they are unprepared. The transition would also strain the country’s electricity grid, potentially increasing electricity usage by nearly 60%. This surge in demand would require substantial investment in grid upgrades and a strategic shift towards renewable energy sources to minimize climate impact.
In addition, the research projects that approximately 6.7 million new charging points may be needed by 2030 to meet the charging demands of EVs, this would require significant investment from both the government and private sector. Policy adjustments, like time-of-use tariffs, may be necessary to encourage charging during periods of lower demand, thus helping prevent an overload.
“India has the opportunity to cut its carbon footprint substantially if large numbers of drivers move to electric vehicles, but there needs to be the right infrastructure and renewable energy capacity in place for the country and the climate to benefit,” explained Dr. Alexandre Koberle, Honorary Senior Research Fellow at the Center for Climate Finance & Investment at Imperial College Business School and lead author of the report. “India has already made strong progress in addressing the impact of carbon emissions caused by transport. By working with the Indian government and local partners, we hope our research will provide policy makers with useful insights that could help the country meet its climate change targets.”
India’s energy sector currently accounts for 75% of the nation’s emissions, and road transport is the second largest contributor. To mitigate the impact of emissions from the transportation sector, the Indian government has committed to increasing investment in renewable energy to 50%, alongside boosting EV and battery manufacturing production.
As demand for combustible fuels declines, the focus of emissions within the automotive sector will shift to the manufacturing process. This could lead to increased interest in low-carbon steel.
The report also analyzes the differing impacts of the EV shift on India’s largest car manufacturers: Maruti-Suzuki, Mahindra and Mahindra (M&M), and Tata Motors. Tata, the market leader, is positioned to benefit from the EV surge. M&M is expected to experience a less significant impact, while Maruti-Suzuki could face cash flow risks unless it boosts its market share.
Dr. Koberle noted that industrial firms within the automotive sector could see a greater impact from the rise of EVs compared to vehicle manufacturers. This will necessitate substantial investment to adapt to manufacturing EV components.
“These emerging risks could be mitigated by providing incentives for firms to increase their electric vehicle market share,” Dr. Koberle said. “One approach would be to offer sustainability-linked bonds—financial instruments linked to specific ESG goals. For example, interest rate reductions could be offered for a company increasing its share of electric vehicle sales, and stricter repayment terms could be imposed for failing to expand charging infrastructure by an agreed proportion. This approach would help to align financial incentives and environmental goals, rather than the two pulling in opposite directions.”
The report titled “Driving Decarbonization: Cross-Sectoral Second Order Impacts of High EV Penetration,” was co-authored by Dr. Alexandre Koberle and Dr. Gireesh Shrimali, Head of Transition Finance Research at Oxford Sustainable Finance Group at the University of Oxford.
