Home > 2026 > India’s Auto Industry Under War Pressure | Piyali Kumar, Utpal Kumar De

Mainstream, Vol 64 No 15, June 1, 2026

India’s Auto Industry Under War Pressure | Piyali Kumar, Utpal Kumar De

Monday 1 June 2026

Abstract

The ever-increasing environmental awareness and critical self-reliance thinking under the combined pressures of geopolitical conflict and rising energy insecurity necessitate the transition of India’s automobile industry to the public fleet. This paper examines how war-induced oil price volatility and constrained inputs have exposed systemic flaws in ICE (internal combustion engine)-powered transport systems. It highlights the growing momentum of electric vehicles (EVs) as a sustainable and resilient alternative. After the U.S.–Iran escalation, the study traces the challenges and strategies for accelerating long-term EV adoption.

Keywords: Electric Vehicles, Energy Security, USA-Iran Conflict, Auto Industry, Zero-Carbon

1. Introduction

The exigency of achieving environmental sustainability and self-reliance necessitates the adoption of non-conventional energy sources and implementation of electric mobility in India’s public transport fleet as an important solution. The Indian automobile sector has been under progressive incorporation of hybrid and electromobility technologies, i.e., partial and full electrification of road vehicles, which can be inherently intermittent. The electrification of transportation system is gaining momentum due to its favourable impact on air quality, energy conservation, employment generation and price reduction in the long run. In spite of these benefits, there is still a dispute regarding the economic, climate, and health benefits of EVs (electric vehicles) adoption in India, as most of the vehicles are driven by ICE (internal combustion engines). Ambitious and front-runner states such as Delhi, Karnataka, Gujarat, and Maharashtra have been promoting large investments in the electrification of road vehicles. They are continuously increasing the share of electric road vehicles due to their large market potential and the availability of better infrastructure and facilities, while other states are still lagging behind.

The intensification of geopolitical tension between Iran and the United States has caused disruption in global supply chains, energy prices, and commodity markets. Traditionally rooted in the ICE framework, the automobile industry is increasingly compelled by structural vulnerabilities revealed by wartime disruptions. India’s automobile industry, deeply integrated into global production networks and highly dependent on imported inputs including semiconductors, crude oil and critical minerals, is passing through a critical juncture. While representing a period of disruption, this vulnerable situation simultaneously opens a window of opportunity for a faster shift towards alternative mobility system, especially EVs, reducing reliance on volatile fossil fuel markets. E-mobility aligns with India’s sustainability and zero-carbon transition goals during war driven oil shocks. It has a potential to significantly reduce greenhouse gas emissions from the transportation sector. In contrast to conventional fuel-powered such as petrol and diesel vehicles, EVs emit zero tailpipe emissions and can be powered by clean electricity, including solar and wind, significantly minimize their carbon footprint. The large-scale adoption of EVs promotes advancements in battery development, charging facilities, and smart grids, which reinforce their importance in achieving a more efficient and sustainable economy as well as a low-carbon future.

2. ICE Paradigm Limits vs Emerging Mobility

India’s ICE-driven automotive sector has been historically sustained by relatively stable global oil supplies and incremental technological progress. War-driven volatility in crude oil prices has disturbed this balance, leading to increased fuel costs, inflationary pressure, and dampening consumer demand. Moreover, supply bottlenecks in key components, such as semiconductors, have exposed the fragility of globally distributed manufacturing networks. In addition, fuel-powered vehicles drastically reduce air quality and harm human health. According to (IEA, 2021; Ministry of Environment, Forest and Climate Change), more than 90% of total carbon emissions among transport modes in India are contributed by road transport. The World Air Quality Report (2021) reported that 35 out of 50 Indian cities did not meet the WHO (World Health Organization) air quality standard of µg/m³. The ICE paradigm is not only limited to technological factors but extends to deeply systemic issues related to environmental sustainability, energy security, and economic resilience.

In contrast, awareness among the people has increased, and EVs have become more attractive to citizens. In 2016–2017, about 5 lakh e-rickshaws dominated the Indian market. Following the success of three-wheeler e-rickshaws, the central government of India is targeting to rapidly enhance the adoption of e-vehicles mainly in the highly polluted cities. EVs comprise a range of different technologies, models, and brands available in the market. The sale of EVs depends on factors such as driving range, frequency of use, and willingness to pay. According to these conditions, different types of EVs are manufactured, namely hybrid electric vehicles (HEVs), plug-in hybrid electric vehicles (PHEVs), and battery electric vehicles (BEVs). HECs combine fuel with electric propulsion and the battery is recharged internally. PHEVs, the most common EVs, are a combination of a small engine and larger batteries, and the batteries are charged by plugging into an external charging point. The difference between HEVs and PHEVs is that fossil fuels are the main energy source for HEVs, whereas PHEVs can be used for longer journeys in electric mode. BEVs are popularly known as Battery Electric Vehicles, which have no engine and are fully driven by electricity.

Emerging mobility paradigms, especially electrification, provides a pathway to decouple transportation from fossil fuel reliance. EVs, integrated with renewable energy system and long-term zero-carbon future goals, creates a fundamentally different energy model that is potentially more resilient to geopolitical disruptions. The Eighth Clean Energy Ministerial annual meeting (CEM8) in 2017 adopted the global EV30@30 campaign target, which projects a 30% sales share for electric vehicles by 2030, marking a transition from internal combustion engine vehicles (ICEVs) to electric mobility. As an existing member of the EV30@30 campaign, India is expected to produce 10 million EVs by 2030 to reduce import dependency. The Federation of Indian Chambers of Commerce and Industry (FICCI) and the Ministry of Road Transport and Highways of India aimed for the sale of electric commercial vehicles and two- and three-wheelers to reach about 70% and 80%, of the total vehicle markets of the respective categories. However, this transition is neither automatic nor frictionless. This necessitates restructuring industrial capabilities, the expansion of infrastructure and coordination of policy frameworks. Now a question arises “why do the EVs constitute the engine of India’s sustainable mobility journey?”. The uncertainty and unpredictability surrounding the recent war in west Asia is expected to generate strong momentum in EV sales. Low maintenance costs, lower noise levels, zero emissions, lower long-term costs, incentives and subsidies, the ability to recharge at home, and independence from fossil fuels are the features of EVs (electric vehicles) that make them more attractive and enable them to emerge as an eco-friendly alternative to ICEVs. People have a strong perception that ICEVs are more affordable than EVs (Kirsanovs et al., 2020; Horesh et al., 2024). Further, studies have shown that EVs are more cost-effective than ICEVs even without subsidies (Moon and Lee, 2019; Weldon et al., 2018).

3. Long-term EV policy

The Indian automobile sector’s shift towards electric vehicles has been driven by strategic policies, including demand incentives, localization requirements, and production-linked incentive (PLI) schemes. Collectively, these policies are designed to establish a domestic ecosystem for manufacturing batteries, electric drivetrains, and associated components. Nevertheless, the long-term effectiveness of EV policies requires stability and coherence. Frequent policy changes, disjointed incentives across states, and infrastructure deficiencies, particularly in charging networks continue to impede faster adoption. Under the Paris Agreement, India has set a target of a 33% reduction in carbon emissions by 2030, and thus there is an immediate need to decarbonize the road transport sector. Rising energy scarcity is pushing the development of greener, electrified vehicles in India. The National Mission on Transformative Mobility and Battery Storage has been established to support the vision of ‘Atmanirbhar Bharat’. NITI Aayog has advocated subsidies as additional financial incentives to oil companies to promote the manufacture of electric vehicles and to upgrade existing fuel stations with fast-charging infrastructure.

Oil companies and electric vehicle industries are working aggressively for manufacturing more affordable EVs. The Central Government of India implemented a scheme- Faster Adoption and Manufacturing of Electric and Hybrid Vehicles in India‟ (FAME) to achieve the EMMP (The National Electric Mobility Mission Plan) 2020 goal. The tenure of 1st phase of FAME was 2015 to 31st March, 2019 with the objective of production and adoption of EVs and HVs and establishment of adequate charging infrastructure for EVs. Additionally, FAME II was approved for the starting from 2019 up to 3 years with the outlet of 10,000 cr. to provide incentives to different kind of EVs. The visionary initiative during India’s G20 Presidency, titled “Electric Vehicle Finance: Innovation and the Future Electric Mobility Landscape,” presents a unique opportunity to advance the goal of achieving net-zero emissions by 2070. Key components of the e-mobility revolution in India’s transportation sector include making electric vehicles economically viable, developing charging and swapping infrastructure, prioritizing public transport, advancing clean technologies, and promoting battery manufacturing, all of which can contribute not only to economic development but also to employment generation in India (Handbook, EVCII). These components also have a positive impact on the environment and human health. Besides the central government, 15 provincial governments have initiated the implementation of EV policies aimed at boosting manufacturing, sales, and infrastructure. Among them, leading states such as Maharashtra, Uttar Pradesh, Karnataka, Tamil Nadu, and Gujarat are moving forward aggressively with effective strategies. Automobile manufacturers have also recently launched two-wheeler and four-wheeler EV models in these states. Through collaborative efforts among central, state, and city authorities, rapid progress in e-mobility technologies would create significant employment opportunities and promote a sustainable future.

However, there are several barriers and challenges, such as the limited availability of charging infrastructure, inadequate electricity generation from renewable sources, high initial costs, and low consumer confidence; which slow down the transition to electrically powered motors. Another drawback of these vehicles is that, when designed for long-distance travel, they tend to be more expensive. Therefore, the long-standing challenges faced by India’s automotive industry and car owners require new solutions. This necessitates rapid innovation in hybrid and electric mobility based on research and development. The market for two-wheelers, three-wheelers, passenger cars, buses, and trucks depends on cooperation at the local and national levels. It is very essential to pay attention to consumers’ concerns about EVs across different metropolitan cities. A sustainable EV strategy must focus on three interconnected aspects: (i) securing supply chains for critical minerals like cobalt, lithium and nickel; (ii) ensuring grid readiness supported by renewable energy to ensure decarbonization and; (iii) improving affordability and accessibility, especially in the two- and three-wheeler dominated mobility ecosystem.

4. Crisis-Evoked EV Surge and Forward Drive

Paradoxically, wartime supply shocks in the current months have unexpectedly driven companies to rethink their reliance on imported components, and spurred the adoption of EVs in India. Potential rise in fuel prices is expected to reshape the cost-benefit balances, making EVs more financially appealing over their total lifespan. In particular, Fleet operators, have already sped up electrification to hedge against fuel price volatility. This “crisis-evoked surge” is not just a transient rise in demand, rather it signals a fundamental shift in industry expectations. Amid fears of rising fuel bills after the early 2026 war, many EVs manufacturers reported higher customer enquiries. India has experienced a significant surge in EV demand, with March sales increasing roughly 49% for cars and 36% for two-wheelers from a year earlier. Tata Motors, the largest EV car manufacturer in India, reported a 20–30% increase in EV sales in March 2026. Beyond triggering an energy crisis, the war conflict is a grave global concern from an economic standpoint. Amid the ongoing USA-Israel-Iran war, the Indian automobile industry is currently experiencing serious supply chain challenges. Given Iran’s significant role in supplying crude oil, natural gas and raw materials, the worldwide automobile industry has long relied on it. Additionally, it is harder to import raw materials such as high-grade aluminium used in making auto parts like alloy wheels, from Iran and other West Asian countries on time. Both consequences eventually make vehicle manufacturing costlier.

Future of India’s automobile industry is shaped by the twin pressures of geopolitical uncertainty and rapid technological evolution. The ICE-to-EV transition represents not merely a powertrain swap, but a comprehensive redefinition of the entire mobility ecosystem. It brings new industrial configurations, energy consumption trends and rethinking urban planning frameworks. A burning question in accelerating EVs adoption is how fast the use of electric battery technologies in road transport can scale. After examining the Indian automobile market and its traditional segments, it can be concluded that EV sales in India have tripled in recent years (Hema and Venkatarangan, 2022). The identified ‘model electric mobility cities’ for the adoption of EVs and charging infrastructure have already committed to exclusively using EVs for all administrative purposes. But the notable commitment of the Government of India to achieve electric mobility targets along with carbon neutrality still remains inadequate. The state and central government should provide the real value to the entrepreneurs of EVs. In this process the Plug-in electric vehicles may be reclassified as “Commercial EVs”. Such practices can directly help the concerned labour class sustain their livelihoods and reduce the use of traditional ICE vehicles. Successful reduction of air pollution and dependence on fossil fuels by controlling ICEVs through state-specific strategies or policies in India would lead to substantial benefits for both the general population and economic productivity.

5. Concluding Remarks

The cost-effective replacement of conventional vehicles with electric mobility necessitates rapid innovation in hybrid and electric mobility driven by research and development. The market for two-wheelers, three-wheelers, passenger cars, buses, and trucks depends on cooperation at the local and national levels. To supply sufficient power to different categories of EVs (HEVs, PHEVs, and BEVs), both private and public charging infrastructure needs to be deployed through progress monitoring, data analysis, and effective electric mobility policies. In sum, war-induced pressures have brought to light the structural weaknesses in India’s ICE-dependent auto industry, which has high import dependence and simultaneously provide vital information to the policy makers and entrepreneurs to understand Indian consumers‟ concerns, along with future market potential. By overcoming the political pitfalls and public opposition, a durable transformation in road EV adoption depends on strong policy commitment, industry agility and urge for a sustainable future.

(Authors: Piyali Kumar, Department of Economics, University of Burdwan Email: kumarpiyali92[at]gmail.com; Utpal Kumar De, Department of Economics, North-Eastern Hill University; Email: utpalkde[at]gmail.com )

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