India is among the fastest growing economies globally and will soon become the world’s most populous country. While road transport expansion and improvement typically serve as a catalyst for socio-economic development, as has happened in many countries, it has unleashed several negative environmental problems in India, namely, burgeoning emissions of CO₂ as well as air pollutants such as nitrogen oxides (NO_X) and fine particulate matter (PM_2.5).

Road transport presently accounts for 12% of India’s energy-related CO₂ emissions and is a key contributor to urban air pollution. As India seeks to meet the increasing demand for private mobility and the transport of goods, energy use and CO₂ emissions from road transport could double by 2050. The IEA’s Stated Policy Scenario (STEPS), which reflects the trajectory implied by today’s policy framework, projects that both energy demand and CO₂ emissions will peak in the 2040s and decline only marginally afterwards. The steadily increasing use of private cars and the expanding truck fleet, with continued reliance on gasoline and diesel, drive the rise. Two-wheelers continue to dominate India’s vehicle fleet, but due to fast electrification, their energy needs and emissions start to decline in the mid-2020s.

India is the world’s fourth largest car manufacturer, making EVs a potential source of economic growth and exports. There are two flagship national programmes to support road transport electrification in India: The Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme, which provides purchase incentives and charging infrastructure support until 20, and the Production-Linked Incentive (PLI) schemes that provide incentives for manufacturing in different sectors. Numerous state-adopted policies complement national programmes.

As a result of these policies, EV sales are projected to reach nearly 35% of total vehicle sales in 2030. To bring the sector on track with the 2070 goal, this share needs to reach 50%. The amount of CO₂ that EVs can avoid will depend on the speed at which India decarbonises its power sector, which currently heavily relies on coal. Today, the tailpipe CO₂ emissions that India’s EV fleet avoids are roughly equal to the CO₂ emissions that such vehicles indirectly cause at the power plant level. However, this is set to change in the future: By 2030, India’s EV fleet will avoid around 5 Mt CO₂, while in 2050, the amount could range from 110 to 380 Mt CO₂, depending on the EV fleet size and the pace of power sector decarbonisation. EV deployment can also considerably reduce citizens’ exposure to air pollution.

Even in the APS, gasoline and diesel still account for more than half of the road transport sector’s energy demand in 2050, highlighting the critical importance of improving fuel efficiency in conventional vehicles. India implemented the Corporate Average Fuel Consumption (CAFE) standards for passenger cars in 2017 and in 2022, these standards were tightened by more than 10% to 113 g CO₂/km. It is expected that manufacturers will meet this target largely by means of flexibility mechanisms that aim to promote technological innovation. Fuel economy standards for trucks were adopted in 2017.

In the STEPS, the fuel efficiency of cars improves by less than 20% up to 2035. In the APS, however, it improves by more than 50%. A speedy update and gradual tightening of its fuel economy standards would help India achieve this. If India were to achieve a 55% reduction in corporate average fuel economy by 2035 compared to current levels (i.e., imitating the EU Fit for 55 target with a five-year time lag), cars sold between 2035 and 2037 could save up to 145 Mtoe in fuel consumption and avoid 400 Mt CO₂ emissions over their lifetime compared with the current policy framework. India could further consider adopting fuel economy standards for two-wheelers, given that they account for more than half of the country’s gasoline consumption. 

Air pollution is one of India’s most pressing environmental challenges. Of the 50 most polluted cities in the world, 35 are in India. Reducing transport-related emissions would have direct public health benefits, given that a large share of emissions occurs in urban areas and close to the ground, directly affecting millions of people. Road transport currently accounts for 20-30% of urban air pollution.

India regulates vehicle tailpipe emissions by means of the Bharat Stage (BS) emission standards. In April 2020, India implemented BS-VI standards, which largely parallel Euro-6/VI norms, leapfrogging from BS-IV to BS-VI in only three years. In addition, several climate-driven policies, including vehicle electrification, have strong co-benefits for air quality and public health. In the STEPS, NO_X emissions from road transport decline by 15-20% by 2030 and fall drastically afterwards, due to the BS standards and the gradual shift to EVs. However, non-exhaust PM_2.5 emissions caused by the suspension of road dust, and brakes and tyre wear abrasion increase and require greater attention.

India’s scrappage policy of 2021 has great potential to reduce air pollution. This policy requires passenger cars older than 20 years and commercial vehicles older than 15 years to pass a “fitness test” to keep their registration. The replacement of freight trucks which fail the test could avoid up to 17% of NO_X and 11% PM_2.5 emissions from trucks, assuming that they would be replaced by trucks that are BS-VI compliant.

• Strengthening policies for electrification. Continue existing demand incentives to help bridge the upfront price gap between EVs and ICEs beyond 2024 (when FAME will expire) and maintain favourable taxation. As electric three-wheelers are already highly cost competitive in TCO terms, fleet targets, ZEV sales requirements or registration restrictions for ICEs could be considered. For cars, demand incentives will need to be accompanied by stringent fuel economy standards. Preferential parking and low-emission zones can provide an additional push for EV adoption, without increasing the burden on public budgets.
• Strengthening fuel economy standards. Establish a roadmap for fuel economy standards in line with long-term climate goals and with a regular revision cycle. Consider EU fuel economy regulations with a five-year time lag, e.g., aiming for a 15% improvement by 2027, applying penalties for non-compliant car manufacturers, and updating flexibility mechanisms. Introduce standards for two-wheelers, sufficiently stringent to support electrification.
• Supporting the transition of heavy-duty vehicles. Continue to prioritise the deployment of electric buses by means of bulk procurement. In trucking, update and enforce fuel economy regulations. In addition to ongoing efforts to improve freight transport logistics, India could support pilot projects for electric and fuel cell trucks and expand demand incentives to ZEV trucks.
• Fully implement the scrappage policy to accelerate phase-out of the most polluting vehicles. Rapidly setting up more testing centres could help accelerate the identification of end-of-life trucks. Strengthening incentives to scrap and replace, and linking them with access to finance, and a public communications campaign, could further enhance the policy’s potential to reduce air pollutants. In addition, and building on the National Clean Air Programme, cities can reduce circulation of the most polluting vehicles in densely populated areas, e.g., by establishing low-emission zones.
• Strengthen policies and mechanisms to improve access to EV financing and reduce the cost of financing. Opportunities include enhancing technical capacities in the financial sector, improving data availability on long-term EV performance, promoting risk mitigation mechanisms and businesses models that reduce financing needs and/or costs, and including EVs in priority sector lending.
• Strengthening the basis for transport policy making. Develop a long-term plan to align road transport with the national 2070 net zero goal, including milestones and measures on how to achieve them. Invest in collecting and managing road transport-related data to support policy making. Strengthen institutional structures, for example, by creating a nodal agency for EV policies, to strengthen policy co‑ordination across sectors and levels of government.
• Strengthen international engagement and collaboration. India already participates in several international collaborative efforts such as the Clean Energy Ministerial's Electric Vehicle Initiative and the CALSTART initiative. India should take advantage of the opportunities that exist to further strengthen international collaboration and improve co-ordination in ways that will contribute to progress towards its long-term goals.