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Sustainability in Automotive industry | An India perspective

Ashish Sharma | Alice Lobo
2nd Jan 2023

Original equipment manufacturers (OEMs) in Automotive serve as growth enablers for the Indian economy. Automotive manufacturing in India accounts for 49% of the country’s manufacturing gross domestic product (GDP), 7.5% of the overall GDP, and 32 million jobs, thus making it a recognized core sector.

India is the fourth largest automotive market in the world, with a penetration of 33 automobiles per 1,000 people. India, the world’s third largest producer of greenhouse gases (GHG) (after China and the United States of America), accounts for 90% of the carbon dioxide (CO2) emissions from road transportation. However, as a rapidly developing country, it is striving to construct a robust and low-carbon economy by encouraging the agenda for green revolution through the adoption of electric vehicles (EVs). Therefore, the automotive industry has a crucial role to play in India’s journey to achieving carbon neutrality or net zero by 2070.

Government of India’s plans on Sustainability


The Government of India (GoI) has introduced various regulations and incentive schemes, not only to boost the adoption of Sustainability across the automotive sector but also to strengthen India’s automotive position globally. There are three widely-known schemes introduced by GoI to boost manufacturing, infrastructure, and the adoption of electric and hybrid vehicles, as well as encourage circularity within the industry.

By 2030, GoI plans to achieve EV sales penetration of 40% for buses, 30% for private cars, 70% for commercial vehicles, and 80% for two- and three-wheelers. The Road Transport and Highways Minister (under GoI) pointed out that in the EV mission, the National Institution for Transforming India (NITI) Aayog (under GoI) has inspired 25 states of India to come up with EV policies, out of which 15 have already announced their state’s EV policy. Mentioned below are a few current initiatives undertaken by GoI and a few OEMs in the industry:

The Faster Adoption and Manufacturing of Electric and Hybrid Vehicles (FAME) scheme was launched to incentivize manufacturers and infrastructure providers by giving subsidies. So far, two phases have been launched. FAME-I and FAME-II schemes were introduced for EV proliferation aimed at aiding demand and bolstering the manufacturing of EVs. The scheme also offers subsidies for two- and three-wheelers, hybrids, e-cars, and e-buses, and for the creation of EV charging infrastructure.

GoI has also launched a Vehicle Scrappage Policy to scrap old and unfit vehicles and replace them with modern and new vehicles on Indian roads. For the policy to be commercially viable the government has allowed dealer workshops to function as inspection and certification stations, since establishing new ones may delay the policy developments and implementation. The policy along with circularity in the manufacturing sector could create $624 billion annual value by 2050.

Many OEMs have set up scrappage centers in accordance with the policy. For instance, Mahindra MSTC Recycling Private Limited (MMRPL) ‒ a joint venture between Mahindra Intertrade Limited and Metal Scrap Trade Corporation Limited (MSTC Limited, under the Ministry of Steel, GoI) ‒ opened its first automotive and steel recycling facility under the brand name ‘Cero’ at Greater Noida in 2018, and then two more facilities in Chennai and Pune, respectively, in 2021. MMRPL plans to set up 25 automotive and steel recycling units by 2025. Similarly, in 2019, Maruti Suzuki India Limited and Toyota Tsusho Group set up a vehicle dismantling and recycling joint venture with an initial capacity to dismantle 24,000 vehicles per month.

Alongside the significant efforts made by the government’s regulations and policies, Indian automakers are focused on reducing the use of energy and water to support Sustainability goals. For example:

  • At Toyota, around 60% of dealerships used eco wash in 2020, a significant increase from a meagre 8% in 2014.  Toyota India has also introduced an Environment Management System Certification, which provides guidance about environmental compliance, training & awareness, and resource management.
  • Hyundai has been promoting dry washing for four years and has saved over 504 million liters of water.

Despite various attempts, there have been several gaps and difficulties pertaining to environmental emission reduction targets and the supply chain of automobile OEMs.

Sustainability strategies of Automotive OEMs


Based on the Capgemini Research Institute (CRI) report on ‘Sustainability in Automotive ‒ from ambition to action (2022),’ automotive players In India are currently focusing on understanding and defining better Sustainability goals for their organizations and on linking these goals to day-to-day activities. They are also facing problems in data gathering and in defining key performance indicators (KPIs) for Sustainability.

Source: Sustainability in Automotive ‒ from ambition to action, Capgemini Research Institute, 2022

Another challenge facing the industry is the adoption of EVs. Since EV is a new technology, there are many impediments to its adoption. Some of the obstacles are: poor charging infrastructure, lack of EV service options, limited EV driving range for commercial and passenger vehicles, and the high cost of batteries (such as nickel-metal hydride (NiMH) and lithium-ion (LiON) for EVs). The shortage of semiconductors has also delayed the production of EVs in India. The power crisis in India due to the shortage of coal is also another hindrance. Customers are also reluctant to adopt EVs citing the lack of charging infrastructure, battery explosion, and also the cost of EVs.

Key focus areas in Sustainability


Currently, the automotive industry is more focused on implementing upstream Sustainability practices to achieve its Sustainability goals. From the perspective of upstream, improving manufacturing practices, sourcing of green energy, and conducting supplier assessments have been top priority. In the meanwhile, OEMs, backed by the government, have been focusing on EVs for curtailing use-phase emissions.

Most of the Indian players have set up Sustainability entities or business units, however global players have additionally set up separate entities for specific Sustainability areas such as EVs and circularity.

Source: Sustainability in Automotive ‒ from ambition to action, Capgemini Research Institute, 2022

By 2050, the circularity of India’s manufacturing systems could provide $624 billion in value annually for the country’s economy. Therefore, developing workflows that support closed loop production and recycling could lower carbon emissions, while enhancing resource efficiency and profitability. In manufacturing, circularity begins with design. For the crucial closed-loop approach, ideas such as disassembly and recyclability must be incorporated from the very beginning in the product development cycle.

One of the areas being neglected by automakers is sales & service. Some OEMs are trying to promote sustainable operations across their dealerships by running campaigns. However, the adoption of sustainable practices across dealerships has been low.

Source: Sustainability in Automotive ‒ from ambition to action, Capgemini Research Institute, 2022

Adopt a holistic view of Sustainability

Collaboration between OEMs and the Indian government is imperative to achieving the automotive sector’s Sustainability goals. Most of the automotive OEMs have participated or availed of the schemes and incentives provided by the government. However, to achieve long-term Sustainability goals there needs to be increased focus on:

  • Aligning business with Sustainability targets
  • Getting the required skilled labor  
  • Ensuring availability of technology/tools
  • Placing greater emphasis on low production and manufacturing costs
  • Making EVs affordable with a standard driving range (along with an ecosystem)
  • Incorporating EVs into consumers’ lifestyles.

Data also is a crucial element in helping the industry make informed decisions. Most of the players in the industry rely on manual collation of data for Sustainability reporting and for conducting lifecycle assessments. The industry needs to focus on improving the sourcing, collation, and structuring of Sustainability data.

Some actions and initiatives which could help the industry in this Sustainability journey are:

  • Promoting localization could significantly lower the production cost and thereby the overall price of vehicles in the Indian market. This is because the dependency rate of the auto manufacturing sector on imports is around 70%.
  • Focus on developing new powertrain technology with innovative research & development (R&D) to address the new emission control demands.
  • Government incentive programs encourage OEMs to focus more intently on their Sustainability goals. For example: to boost the demand for EVs, the Indian government has announced a $3.5 billion incentive program to increase EV production in India. Around 8 to 18% of the total sales value of the EVs and components are to be allocated as incentives.
  • Achieve greater resilience in manufacturing and supply chain areas either by collaborating with top automotive management consultants, focusing more on customer engagement or by taking advantage of the current digital retailing trend, like Tesla. By eliminating dealer commissions, this strategy could assist in lowering total costs.
  • Creating focus departments for Sustainability could help automotive players to focus on specific areas in Sustainability which call for distinct expertise and come with a unique set of requirements. Some automotive OEMs have established a separate business unit/entity which investigates all facets of Sustainability. However, in the long run, organizations should consider creating separate departments for various Sustainability initiatives. Additionally, Sustainability must be embedded into all organizational departments and divisions.
  • Create a circular car: The primary focus of the Indian automotive industry, along with the government, is on the adoption of EVs. Backed by government initiatives and industry stakeholders, India needs to form a robust Sustainability ecosystem by creating a sustainable business model. However, electric vehicles alone cannot help in achieving Sustainability across the automotive industry. It needs to focus more on circularity from energy decarbonization, material circularity, lifetime optimization, and utilization optimization to achieve its goals.

Within the industry more emphasis needs to be placed on downstream operations which have been neglected and which are also the largest contributors to emissions. Dealerships are the main interface between OEMs and the customers. If the automotive industry aims to become sustainable in the future, dealerships need to become catalysts of Sustainability. Automotive players need to take a holistic approach towards Sustainability which could enable them to  assist suppliers, dealers, and customers in their Sustainability journey.