The Indian EV sector will play a crucial role in helping India achieve its decarbonisation targets by 2030, reducing crude demand by 480,000 b/d from 2023 to 2030, according to the IEA
The Indian electric vehicle (EV) sector is set to play a pivotal role in the country's ambitious decarbonisation plans by 2030, according to the Paris-based International Energy Agency (IEA). The IEA's recent report on India's oil market outlook for 2030 underscores the significant impact of new EVs and energy efficiency enhancements on the nation's crude demand, projecting a 480,000 barrels per day (b/d) reduction from 2023 to 2030.
Without these measures, India's oil demand would have surged to 1.68 million b/d by 2030. The rise in EV adoption, energy efficiency improvements, and the growth of biofuels will initially impact oil demand in the transportation sector before extending to other segments.
Despite being the largest source of global oil demand growth up to 2030 due to industrial expansion, India is expected to witness only a 0.7 percent growth in gasoline demand during this period, a stark contrast to the 40 percent increase in the country's car fleet. The proliferation of EVs and biofuels will contribute significantly to this divergence.
The electrification of India's vehicle fleet is anticipated to slash oil product demand by 200,000 b/d by 2030, placing substantial pressure on gasoline demand. Although only 6 percent of new vehicles in India were EVs in 2023, the IEA foresees a transformative shift in the coming years, with approximately half of further two- and three-wheelers and one-eighth of new passenger cars entering the market by 2030 being electric.
The government's target of electrifying 30 percent of new vehicles by 2030 aligns with this projection. As the cost competitiveness of EVs increases, market dynamics are expected to shift, with EVs becoming more economically attractive than internal combustion engine (ICE) vehicles, further boosting adoption.
While the lack of an announcement regarding the third phase of subsidies under India's Faster Adoption and Manufacturing of Electric Vehicles scheme has not immediately impacted the EV sector, experts believe subsidies and incentives may not be sustained indefinitely.
The government's focus on providing subsidies directly to consumers and additional incentives from states like Tamil Nadu, Goa, and Uttar Pradesh may influence the trajectory of the EV market in the coming years. However, market participants anticipate a future scenario where subsidies will be withdrawn as the EV market matures and gains wider consumer acceptance.