Indian auto sector can cut emissions by 87% with green power, steel: Study

Industry is at 'turning point' and could be the leader in low-carbon global economy, according to research by an independent group

India’s automobile industry, the world’s third largest, could cut its emissions by 87 per cent by 2050 through green electricity and low-carbon steel, according to an independent study released on Wednesday.

 

The study by the Council on Energy, Environment and Water (CEEW) comes as automakers — Tata Motors, Mahindra & Mahindra, TVS Motors, and BMW among them — have in two years increased the production of electric and hybrid vehicles while simultaneously setting ambitious emission targets. The companies have committed to the Science-Based Targets initiative, aligning with global definitions of net zero that require full value-chain decarbonisation by 2050. Indian auto manufacturers’ cleanup of supply chains will not just lower emissions, but also enhance long-term cost competitiveness and position them as preferred international suppliers.

   

While targets typically focus on direct factory and downstream use-phase emissions, upstream supply chain emissions are largely overlooked despite contributing the majority of the sector’s carbon footprint. The study tracks emissions on three “scopes”: direct emissions from vehicle manufacturing (Scope 1), indirect emissions from electricity use (Scope 2), and upstream supply chain emissions (Scope 3). Scope 3 emissions comprise over 83 per cent of the auto industry’s emissions in India due to the use of coal-intensive steel and rubber in manufacturing, according to CEEW, a not-for-profit policy research institution based in New Delhi. 

 

“India’s auto industry stands at a turning point. To lead in a low-carbon global economy, we must decarbonise not just the vehicles we drive but the industrial processes that build them,” said Arunabha Ghosh, chief executive officer, CEEW.

 

“Automakers must clean up how their vehicles are made, what powers their factories, and how their suppliers produce critical inputs like steel and rubber. This is not new — promisingly, most major manufacturers in India are already thinking about these shifts," he said.

 

"Now, the push must be to create demand for green materials at scale, lower costs, and deploy cleaner technologies rapidly. The auto sector can emerge as a force multiplier for economy-wide net-zero transitions—but only through collective foresight, investment and innovation."

 

The study used a customised version of the Global Change Analysis Model to project emissions from India’s vehicle manufacturing sector under various pathways. It found that if current business-as-usual (BAU) trends continue, annual vehicle production could rise nearly four-fold: from 25 million units in 2020 to 96 million by 2050. Emissions, however, would only double, reaching 64 million tonnes of carbon dioxide, suggesting a steady decline in emissions per vehicle. Still, the absolute rise in emissions underscores the need for accelerated action.

 

Steel alone would remain the largest source of supply chain emissions, with suppliers expected to rely heavily on coal in this business-as-usual scenario. The study estimates that sourcing low-carbon steel could reduce emissions by nearly 38 million tonnes by 2050.

 

If original equipment manufacturers (OEM) and their suppliers were to aim for net-zero by 2050, annual emissions could fall from the projected 64 MtCO₂ (million tonnes of carbon dioxide equivalent) to just 9 MtCO₂: an 87 per cent reduction. This would require OEMs to completely shift to green electricity and steel suppliers to use 56 per cent hydrogen-based energy, reducing coal’s share to under 10 per cent. In addition, increasing scrap-based steel production to 48 per cent by 2050 would significantly reduce emissions and resource intensity. 

 

“To align India’s automobile sector — central to GDP, jobs, and industrial growth — with a net-zero future, we must go beyond electrifying vehicles. We must decarbonise manufacturing itself. Leading OEMs are already making corporate decisions to stay ahead by decarbonising their operations and supply chains. What’s needed now is strong procurement intent, especially through advanced market commitments to secure green steel and other low-carbon materials," said Vaibhav Chaturvedi, Senior Fellow, CEEW.

 

"The policy landscape may be evolving, but major markets are still pushing hard on green through corporate and investor action. Indian automakers must treat clean manufacturing as a strategic lever — not just for cost control, but to stay competitive in global supply chains," Chaturvedi said.

 

The study examined a high-hybrid scenario, where hybrids dominate in the near term before EVs take off. While this reduces energy demand among component suppliers by 7 per cent, emissions remain slightly higher than in a BAU shift to EVs due to continued reliance on combustion engines. Ultimately, hybrid vehicles are at best a bridge and will need to be reduced to make way for zero-carbon vehicles.

 

The study recommended a two-pronged strategy for the automobile sector to be net-zero by 2050: accelerate the transition to electric vehicles (EV) and decarbonise the full manufacturing value chain. As 65-80 per cent of a vehicle’s lifetime emissions come from its use phase, shifting to EVs remains the most effective way to cut end-use emissions. But deep reductions will only be possible if EVs are manufactured using clean energy and low-carbon materials. This requires coordinated action across OEMs and suppliers, supported by long-term procurement commitments and policy signals that encourage investments.