India's multifuel path to automotive sustainability

India's automotive sector is at a turning point, emerging as a significant global player in automotive sustainability. In 2024, passenger vehicle (PV) sales hit a record 4.21 million units, up 4.8% from the previous year, driven by growing SUV demand and broader fuel options amid economic, regulatory and infrastructure changes.

In 2025, the market is poised for further growth, driven by new vehicle models, particularly in the SUV segment, and favorable tax policies. The goods and services tax (GST) on small cars fell from 28% to 18%, which should boost affordable-segment demand. 

For larger cars, a flat GST of 40% applies, though the lack of additional taxes effectively lowers consumers’ overall tax burden. We project PV sales to increase by 2.1% for 2025 and reach about 5.51 million units by 2030.

However, the industry faces challenges: reliance on imported oil, urban air pollution and the need for affordable mobility. Unlike many Western nations advocating for a single electric vehicle (EV) approach, India is pursuing a multifuel engine strategy to diversify energy sources and reduce risks. 

Through organizations like NITI Aayog, the government has crafted a comprehensive policy framework that balances long-term environmental goals with immediate socioeconomic needs, creating a market where multiple fuel options can coexist and foster sustainability in the automotive industry.

The chart above illustrates the projected market share trends for BEVs, ICE vehicles, and hybrid vehicles in passenger vehicle production in India, highlighting a significant shift towards electrification in the automotive industry.

Compressed natural gas (CNG) offers a cleaner, lower-cost alternative to traditional fuels, especially in urban areas, due to its mature technology and easy adoption for consumers. Government policies aim to expand supply infrastructure through city gas distribution networks by building pipelines and filling stations. The CNG vehicle market is rapidly growing, led by Maruti Suzuki's "CNG-first" strategy, followed by Tata Motors and Hyundai, targeting cost-conscious buyers seeking low running costs without the high initial investment and range anxiety of EVs. 

Hybrid technology is also being integrated into CNG vehicles, with Maruti and Toyota planning CNG hybrids by 2027. In 2024, CNG PV production rose by 32.4% year-over-year to about 860,000 units (17.5% of total PV production) and is projected to reach approximately 1.64 million units by 2030. ze vehicles that offer practicality, style and versatility—often more so than the general population.

Hydrogen fuel-cell electric vehicles (FCEVs) are key to India's green mobility strategy, especially for heavy-duty transport. The PLI scheme supports the development of hydrogen FCEVs and their components, fostering domestic manufacturing. 

The FCEV market in India is nascent, with no commercial sales yet, though major players like Ashok Leyland, Hyundai, Reliance Industries and Toyota are preparing through collaborations and pilot projects. 

Significant barriers to hydrogen mobility include the absence of a public hydrogen refueling network and the challenges of producing green hydrogen at scale, which demands substantial renewable energy and faces technological, financial and safety hurdles.