OPINION | Why India’s auto component industry must prepare for a multi-fuel future

India’s importance in the global automotive ecosystem extends well beyond domestic demand.

India’s automotive landscape is undergoing one of the most significant transformations in its history. For years, conversations have centered on the rise of EVs and the gradual decline of internal combustion engines. But the reality is far more complex. India’s future of mobility will not be defined by a single transition from ICE to EV, but by the coexistence of multiple propulsion technologies including EVs, hybrids, CNG, ethanol, and other clean fuel platforms.

This shift demands that the auto component industry prepare for a diversified future. The companies that thrive will be those able to serve the needs of multiple technologies, adapting to different markets, regulations, and consumer behaviors.

A Growing Market, Driven by Multiple Fuels

As of June 2025, EVs accounted for 7.3% of two-wheeler registrations and 4.5% of four-wheeler registrations, according to the Vahan Dashboard. In the same month, India registered 1,80,249 EVs, which includes 1,05,355 electric two-wheelers, 16,333 passenger three-wheelers, and 13,174 four-wheelers. This contributed to a total of 21,01,292 EVs sold over the past year. These figures underline the steady momentum of EV adoption across India’s key vehicle categories, with growth especially visible in two-wheelers and three-wheelers. Commercial fleets and urban mobility solutions remain the primary drivers of this uptake, supported by targeted policy incentives and the expansion of charging infrastructure.

While EV adoption is accelerating, Moody’s Ratings projects that India’s passenger vehicle sales will be reaching approximately 5.1 million units per year by 2030, the highest growth forecast among major Asian markets. This growth trajectory underscores that conventional powertrains, including petrol, diesel, hybrid, CNG, and biofuel vehicles, will remain significant even in a progressively electrifying market.

Hybrid vehicles are increasingly relevant, complementing EV adoption with significant growth momentum. HSBC Global Research reports that hybrids, while currently only about 2% of the market, are projected to take the share of diesel and reach 18–20%, similar to Europe, as consumers seek greater range and fuel efficiency.

CNG vehicles hold a firm foothold in both passenger and commercial segments, driven by lower operating costs and expanding refuelling infrastructure, especially in major cities like Delhi and Mumbai.

Ethanol blending initiatives are also scaling up rapidly. India achieved an ethanol blend rate of nearly 18% by the end of 2024, and is firmly on track to meet or exceed its 20% blending target by 2025, supported by policy incentives and feedstock diversification.

For component manufacturers, this means that the market is no longer defined by an ICE versus EV binary. It is a multi-fuel ecosystem that requires agility and foresight.

Coexistence Is the New Normal

The expectation that EVs will completely displace conventional vehicles in the near future is unrealistic. India’s consumers are diverse, and their needs vary widely between urban and rural markets. In metropolitan areas, EVs are increasingly attractive for personal mobility and shared services. In semi-urban and rural regions, hybrids, CNG, and ethanol-powered vehicles remain more practical due to cost considerations and the availability of refueling infrastructure.

This diversity is not a limitation but an advantage. A multi-fuel ecosystem allows India to address different market segments while gradually advancing toward its sustainability goals. For the auto component industry, this coexistence demands strategies that are inclusive, flexible, and technologically broad.

Building Capabilities Across Technologies

Investing across multiple powertrain platforms is not about hedging bets, it is about long-term resilience. EVs require precision-engineered components such as e-axles, battery management systems, and lightweight drivetrains. Hybrids call for advanced combustion technologies integrated with electric systems. CNG vehicles demand robust fuel storage and injection components, while ethanol-based engines require materials and designs optimized for biofuel compatibility.

Developing this range of expertise ensures that component manufacturers remain relevant across diverse markets. It also positions India’s auto component sector as a reliable partner for global OEMs that increasingly want suppliers capable of servicing multiple platforms.

Flexible Manufacturing as a Strategic Imperative

In this evolving environment, the ability to pivot quickly is a critical differentiator. Manufacturing facilities must be designed to accommodate a variety of product lines, whether for EVs, hybrids, CNG, or ethanol vehicles. Production systems should be modular and reconfigurable, allowing manufacturers to shift output in response to changing demand.

Equally important is workforce readiness. Workforces must be trained to work across technologies, understanding the nuances of different powertrains and the specific demands they place on components. A cross-functional workforce, supported by digital tools and smart manufacturing practices, can deliver both efficiency and agility.

India as a Global Hub for Multi-Fuel Mobility

India’s importance in the global automotive ecosystem extends well beyond domestic demand. The country is emerging as a preferred export base for regions such as Africa, Southeast Asia, and Latin America. These markets share many of India’s characteristics, including infrastructure gaps, fuel pricing sensitivities, and diverse consumer profiles.

For these regions, ICE, hybrids, CNG, and ethanol vehicles will remain dominant for the foreseeable future, even as EV adoption gradually increases. This reinforces the need for India’s component industry to build global-standard capabilities across multiple fuel platforms. By doing so, Indian manufacturers can meet both local needs and international demand, strengthening their role in the global supply chain.

Preparing for Parallel Futures

Planning for a multi-fuel future is not about compromise. It is about designing for resilience. Auto component manufacturers must invest in intelligent factories, platform-agnostic tooling, collaborative R&D, and partnerships with OEMs that are driving innovation across all propulsion technologies.

The coming decade will not deliver a one-size-fits-all mobility solution. Instead, India will see a diverse mix of EVs, hybrids, CNG, ethanol, and conventional vehicles. Each will play a role in meeting the country’s mobility and sustainability needs.

India’s Competitive Advantage

The growth of EVs is undeniable, but the future is multi-fuel. For India’s auto component manufacturers, this is not a challenge but a strategic advantage. By building expertise across multiple propulsion platforms, the industry can position itself as a global model for supply chain agility and manufacturing resilience.

The road ahead is not about choosing between EVs and conventional engines. It is about preparing for a future where many technologies coexist, complement each other, and collectively drive India’s mobility transformation.

(Naoya Nishimura, CEO of Musashi India and Africa Region.)

Views are personal, and do not represent the stance of this publication.