Bigger and Greener: The Changing Landscape of Indian Mobility

Urban Infrastructure Challenges

Existing congestion in big Indian cities shows how urban infrastructure may limit the auto industry’s growth. Today, there are more than 100 registered vehicles per kilometer of road in many big Indian cities. This often leads to gridlock and protracted journey times even for shorter trips.

Traffic jams also cause pollution, which is another deterrent against further private vehicle ownership. Forty of the world’s 100 most-polluted cities are in India, with Delhi ranked as the worst, according to air-quality monitoring company IQAir. A scrappage scheme may help to eliminate old fuel-guzzling, high-emission vehicles.

Pollution and congestion could spur demand for public transportation in India. The nation has about 2 million buses on the road. Still, this is only about 1.2 per 1,000 people, which is notably less than in developed markets. This does provide massive headroom for growth. Presently, many states have started switching to e-buses and adopting a public-private partnership model, where the government pays bus operators per kilometer of service. E-buses will rise to 9% of the total bus fleet by 2026 and to 30% by 2030, according to S&P Global Mobility.

Sales of commercial vehicles will also likely increase as economic growth stokes goods shipments and infrastructure development. India’s GDP will expand 6.7% per year from fiscal 2024 to fiscal 2031, reaching $6.7 trillion, according to an S&P Global forecast.

The pandemic and subsequent lockdowns also spurred the use of vehicles for hyperlocal deliveries, with goods being brought to consumers instead of the other way around. The associated rise of e-commerce and startups will likely fuel sales growth for two-wheelers and light commercial vehicles in coming decades.

Where Cars Play a Role

The automotive industry is a key contributor to the Indian growth story as it generates almost 7% of GDP and provides a livelihood to more than 40 million households spread evenly across the nation. The industry is also adapting to growing urbanization, rising aspirations, higher incomes and stricter regulations.

The average price of a car has more than doubled in India over the past decade to 1,150,000 Indian rupees (about $14,000) from 450,000 Indian rupees. This is an opportunity for global carmakers, as it reflects Indian drivers’ willingness to pay up for feature-loaded and robust vehicles that offer safety and security. Still, cars will continue to be overshadowed by two-wheelers in terms of units. The two-wheeler market will reach 27 million units in 2030, more than four times the size of the light-vehicle market, according to S&P Global Mobility. Half of these two-wheelers are likely to be battery-electric.

We predict that shared mobility, such as ride-hailing services and car-sharing platforms, will gain further traction in India. Car subscription services — where consumers pay a monthly fee for access to a vehicle — are also gaining popularity. These developments reflect a focus on cost-effective and convenient transportation, along with changing consumer preferences. Indian millennials and Gen Z consumers are less interested than Gen X and baby boomers in owning a car. The shift toward shared mobility will help to increase vehicle utilization, which is extremely low. On average, cars are in use less than 5% of the time in India.

India’s Power Mix

In the medium term, India will likely adopt a range of power technologies for vehicles due to each state having its own unique set of challenges. Different states will need different solutions, possibly including smart cities, reskilling, digitization and tweaking the models offered by carmakers in various parts of the country. A wide variety of technologies will also likely serve the diverse needs of customers all over India, such as internal combustion engines (ICEs), compressed natural gas, electricity, hydrogen, flex fuels and biofuels.

The auto industry is already taking advantage of greater electrification in India. Original equipment manufacturers, parts suppliers, fuel-filling companies, the government, testing agencies and others are working toward a common goal of supplying greener transportation. Stakeholders across the sector are stretching themselves and adopting innovative technologies at an ever-quicker pace. The government is proactively working to reduce pollution and cut energy imports by promoting greener mobility and technologies.

Decarbonization Ambitions

Over the longer term, green hydrogen may emerge as India’s main alternative fuel for mobility. A few Indian players are already engaging in the government’s $2.1 billion Production-Linked Incentive scheme for hydrogen. This may eventually help the technology scale and deliver on India’s decarbonization objectives. The country has pledged to reach net-zero emissions by 2070. Some conglomerates aim to achieve that goal in India by 2037.

Looking Forward: The Four I’s of Mobility

India’s mobility sector is poised for growth, building on four I’s: infrastructure, innovation, investment and inclusiveness.

Infrastructure: There is massive development in road infrastructure, which is changing the landscape of the country. Digital infrastructure is also spurring growth, especially in rural areas.

Innovation and technology: Globally, the auto industry is seeing a “race for CASE,” meaning connected, autonomous, shared and electric. In India, connected, shared and electric are likely to predominate. Autonomous vehicles may be limited to nonpublic areas, such as college campuses or large corporate facilities.

A key innovation goal for Indian carmakers is developing battery-electric vehicle technologies that are affordable for the local market. Core and peripheral EV infrastructure will also have to be built. Still, once the technology becomes cost effective, Indian drivers will see EVs as a viable alternative to conventional ICE technology.

Investment: Car manufacturers and suppliers are set to spend more than $15 billion on capital expenditure in India through 2030. This is to meet consumer demand and develop new technologies.

Inclusive growth: Mobility depends on an ecosystem. Carmakers, parts suppliers, fuel-filling companies, energy providers and the government must all collaborate on common platforms to provide affordable and efficient mobility solutions.

Conclusion 

India’s mobility sector is on the cusp of a major transformation. Consumer aspirations are spurring a shift in vehicle sales toward SUVs, while environmental concerns are helping to fuel demand for alternative propulsion systems.