Whalesbook
Manufacturing Emissions Emerge as Key Challenge for India's Auto Sector
India's automotive industry, a significant contributor to the nation's GDP, stands at a crucial juncture. While the rapid growth of electric vehicle (EV) sales and supportive government policies are driving cleaner mobility on the roads, a substantial challenge is emerging from factory gates. The production of vehicles, from raw material extraction to assembly, generates significant greenhouse gas emissions that must be addressed to meet ambitious net-zero pledges and maintain global competitiveness.
The Growing Burden of Industrial Emissions
Vehicle production in India is set for considerable expansion. Projections suggest four-wheeler ownership could increase from approximately 34 per 1,000 people currently to 201 by 2070. This growth is expected to more than triple energy demand for manufacturing between 2020 and 2050, pushing associated carbon dioxide emissions from 30.3 million tonnes in 2020 to an estimated 64 million tonnes annually by 2050.
The breakdown of these emissions reveals a complex industrial challenge. Direct factory operations, Scope 1 emissions, constitute a mere 1% of the total. Indirect emissions from purchased electricity, Scope 2, account for 16%. However, the overwhelming majority, reportedly 83%, originates from upstream supply chains, Scope 3 emissions. Steel and rubber production are identified as the primary culprits, highlighting the critical need to decarbonize material inputs. Studies indicate that the steel required for a single car can contribute significantly to atmospheric CO₂ [cite: Source A].
Decarbonization Strategies and Economic Realities
To align with net-zero targets, the industry must tackle all emission scopes. A report by the Council on Energy, Environment and Water (CEEW) suggests that a shift to 100% renewable electricity for factories and the adoption of low-carbon steel could cut the auto industry's manufacturing emissions by up to 87% by 2050.
Reducing Scope 2 emissions requires sourcing approximately 54.17 TWh of electricity from renewables by 2050, necessitating an estimated 34 GW of additional renewable energy capacity solely for auto OEM factories. The transition to green steel, while currently more expensive, is deemed crucial. Automakers are urged to implement Advance Market Commitments (AMCs) to stimulate demand and drive down costs for materials produced using hydrogen-based processes or recycled scrap. Similarly, electrifying the production of materials like rubber, powered by renewable energy, is essential.
Implementing these changes is projected to increase vehicle prices by an estimated 2-5% due to higher green steel procurement costs, which could be up to 35% more expensive. However, this potential price increase is expected to be offset by India's projected quadrupling of per capita income by 2050, minimizing the impact on demand. The long-term benefits of cleaner air, resilient supply chains, and enhanced export competitiveness in a global market increasingly focused on carbon-sensitive trade policies are anticipated to far outweigh these initial costs [cite: Source A].
Competitive Imperative and Future Outlook
Leading automakers, including Mahindra & Mahindra, Tata Motors, and TVS, are already setting ambitious emission reduction targets, aligning with global Science-Based Targets initiative (SBTi) commitments. As global markets increasingly adopt carbon border taxes and green procurement standards, manufacturers with low-emission supply chains will hold a significant competitive advantage [cite: Source A, 18].
The automotive industry contributes approximately 7.1% to India's GDP and plays a vital role in manufacturing and employment. Decarbonizing the manufacturing process, in addition to promoting electric mobility, positions India's auto sector not only to meet its environmental obligations but also to become a driving force in the country's broader low-carbon transition and a preferred global supplier. Failure to address these manufacturing emissions risks market access and long-term competitiveness.