EVs, ethanol blends gaining traction in Indian auto sector’s fuel transition

India’s automotive industry stands at a critical juncture, with electric vehicles (EVs) gaining traction while ethanol, a biofuel derived primarily from sugarcane, emerges as a viable and immediate solution to reduce the country’s oil import dependency and improve air quality.

The government’s ambitious target of achieving a 20 per cent ethanol blend with petrol by 2025 has spurred significant investments and research in the automotive sector.

Car manufacturers are rapidly adapting their engines to accommodate higher ethanol blends. While existing vehicles can run on E10 (10 per cent ethanol) without modifications, E20 (20 per cent ethanol) compliant engines are becoming the norm. This shift necessitates adjustments in engine components, fuel delivery systems, and material compatibility to ensure optimal performance and durability.

However, switching to E20 fuel from E10 can lead to a decrease in fuel efficiency. Older vehicles, especially four-wheelers, will experience the most significant drop, with a 6-7 per cent reduction in mileage. Two-wheelers designed for E10 will see a smaller decrease of 3-4 per cent.

Newer four-wheelers built for E10 will likely only see a minor 1-2 per cent reduction. The Society of Indian Automobile Manufacturers (SIAM) notes that with engine modifications (hardware and tuning), the efficiency loss due to blended fuel can be minimised. To offset the drop in efficiency, tax incentives on E10 and E20 fuel may be considered.

The potential of flex-fuel vehicles, capable of running on any blend of petrol and ethanol, is being explored. These vehicles offer greater flexibility and could accelerate the adoption of higher ethanol blends. However, challenges such as the availability of consistent ethanol supply, infrastructure development, and consumer awareness need to be addressed for a seamless transition.

Integrating ethanol into India’s automotive ecosystem presents a win-win situation. It not only contributes to a cleaner environment but also supports the agricultural sector by creating a new market for sugarcane and other feedstocks. As India strives for energy independence and sustainable development, ethanol-powered vehicles are poised to play a crucial role in shaping the country’s automotive landscape.

Union Road Minister Nitin Gadkari has been a strong advocate for reducing goods and services tax (GST) on ethanol-powered cars. To incentivize the purchase of ethanol-powered vehicles, the minister has proposed significantly lower taxes.

Flex-fuel cars would enjoy a 2-3 per cent tax reduction compared to gasoline-only models. Flex-fuel hybrids would receive an even larger tax cut of 13-14 per cent to offset their higher production costs.

This could result in substantial savings for consumers. For instance, a flex-fuel hybrid priced at ₹9 lakh could be up to ₹2.8 lakh cheaper after-tax deductions, making it more affordable than a comparable petrol-only car. Currently, hybrid cars are subject to a 28 per cent GST.

Toyota Kirloskar Motor has earlier highlighted that flex-fuel hybrids using 100 percent ethanol as fuel pollute even less than battery EVs when considering “well-to-wheel” emissions. This comprehensive emission measure accounts for the total emissions from fuel extraction to its use in a vehicle.

Earlier in 2023, Toyota has showcased a 100 per cent ethanol hybrid version of its Innova, though mass production in India is yet to start. Maruti Suzuki is also developing vehicles that can run on flexible fuel blends.

The push for flex-fuel hybrids also includes models like the Toyota Hyryder and the Honda City e-Hybrid, which combine a regular petrol engine with an EV battery and motor. Minister Gadkari has proposed tax incentives to promote the adoption of ethanol-powered vehicles. This includes reducing taxes on flex-fuel vehicles (FFVs) that run entirely on ethanol, as well as flex-fuel strong hybrid electric vehicles (FFV-SHEVs).

These measures are aligned with India’s goal of achieving a 20 per cent ethanol blend in all petrol by 2025. This ambitious target is expected to significantly reduce India’s reliance on oil imports, saving an estimated ₹30,000 crore annually, while also contributing to a cleaner environment by cutting greenhouse gas emissions by 10 million metric tons. Flex-fuel hybrids, which pollute even less than battery EVs over their lifetime, could significantly contribute to this goal.