INDIA FLEXFUEL CARS MARKET SIZE AND SHARE ANALYSIS - GROWTH TRENDS AND FORECASTS (2023 - 2030)

India flexfuel cars market size was estimated to be valued at US$ 611.8 Billion in 2023 and is expected to reach US$ 1,627.4 Billion by 2030, exhibiting a compound annual growth rate (CAGR) of 15% from 2023 to 2030.                     

India Flexfuel Cars Market Regional Insights

• Northeast Region:
• The Northeast region of India typically had a lower density of flexfuel cars compared to other regions.
• Due to the abundance of agricultural activities in some states in this region like Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, there may have been some interest in flexfuel vehicles running on ethanol, but adoption was not widespread.
• Government incentives and awareness campaigns could have played a role in promoting flexfuel cars in this region.
• Midwest Region:
• The Midwest region, which includes states like Madhya Pradesh, Chhattisgarh, and parts of Maharashtra, had moderate adoption of flexfuel cars.
• Ethanol production from sugarcane and other crops in this region might have contributed to the availability of ethanol as a fuel option.
• The government's push for cleaner and more sustainable transportation options could have boosted the flexfuel market here.
• South Region:
• The Southern region, including states like Karnataka, Tamil Nadu, and Andhra Pradesh, likely had a significant market for flexfuel cars
• This region has a relatively higher awareness of and demand for environmentally friendly and fuel-efficient vehicles.
• Availability of ethanol from sugarcane and other sources might have driven the adoption of flexfuel cars.
• Western Region:
• The Western region, comprising of states like Maharashtra and Gujarat, may have had a strong market for flexfuel vehicles
• Maharashtra, in particular, is known for ethanol production, thus making flexfuel cars a feasible option.
• Urban centers like Mumbai and Pune might have contributed to the demand for cleaner and more sustainable transportation.

Figure 1. India Flexfuel Cars Market Share (%), By Region, 2023

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Analyst Viewpoint:

India flexible fuel vehicles market has strong growth potential as in 2025-2030. The adoption of E20 and E85 flex fuel vehicles will steadily rise due to increasing mandates on their production and sales. Automakers are expanding their flex fuel vehicle lineup to leverage the price advantage these vehicles provide over conventional gasoline variants. Government incentives and awareness programs will fuel further demand.

However, lack of widespread E85 fuel pumps continues to restrain the market's growth. Setting up an extensive retail infrastructure for specialized fuels like E85 will require significant investment. This remains a major challenge. Flex fuel two-wheelers may witness slower uptake since they have a small fuel tank where the benefits of flex-fuel technology are less prominent.

The southern region, with its concentration of sugar mills and distilleries, is expected to emerge as the dominant producer of ethanol. Subsequently, states like Karnataka, Tamil Nadu and Andhra Pradesh may register higher sales of flex-fuel vehicles to tap this locally available fuel option. Original equipment manufacturers are launching new flex-fuel models across various categories like hatchbacks, Sports Utility Vehicle (SUVs) and pick-up trucks to make the technology accessible to diverse set of customers.

India Flexfuel Cars Market Drivers:

• Supportive government policies and regulations: The Indian government has implemented policies such as the Ethanol Blending Program and Bharat Stage VI emission norms to boost adoption of cleaner fuels and vehicles. The target of 20% ethanol blending in petrol by 2025 will necessitate compatibility of the vehicle fleet with higher ethanol blends. This has encouraged automakers to develop flexfuel models. The government has also provided tax incentives for flex-fuel vehicle purchases and lowered GST on such models. Further policy support can accelerate consumer adoption of flexfuel cars. According to  the Society of Indian Automobile Manufacturers (SIAM) data, total flex-fuel cars sold rose from around 4,700 units in 2020 to over 16,000 in 2021. This growth trajectory is expected to steepen further with the nationwide E10 rollout just months away.
• Cost benefits for consumers: With rising petrol and diesel prices, flexfuel cars provide significant fuel cost savings for consumers, as ethanol costs 20-50% lower. Flexfuel models have gained popularity in markets like Brazil and U.S. due to their economic value proposition. If higher ethanol blends become widely available in India, flex-fuel cars would offer substantial savings on fuel bills for price-sensitive Indian consumers. This cost incentivization can boost consumer demand. According to the data provided by the Ministry of Petroleum and Natural Gas, Government of India, molasses-based distillery capacity for producing bioethanol in India increased from 206 crore liters in 2020 to around 250 crore liters in 2022.
• Developments in engine technologies: Automakers are investing in research and development (R&D) to develop optimized engines for ethanol compatibility. This includes lightweight parts, corrosion-resistant materials, advanced fuel injection and engine control systems. With solutions for cold start, drivability and emissions challenges, new engines can deliver seamless flex-fuel performance. Original equipment manufacturer (OEM) partnerships with technology firms are expediting development of robust flex-fuel powertrains suited for Indian conditions. As part of its National Biofuel Policy 2018, the government has set a target of developing a fleet of one million flex-fuel two and three wheelers in the country by Ministry of Petroleum and Natural Gas, Government of India 2023.
• Environmental sustainability: As compared to gasoline, ethanol reduces particulate, NOx and CO2 emissions. Wider adoption of ethanol-compatible vehicles hence supports India’s renewable energy and decarbonization goals. Younger and environment-conscious consumers are likely to prefer flexfuel cars that are aligned with sustainability values. Automakers can also meet tighter emission norms in the future by transitioning to flex-fuel models. According to International Renewable Energy Agency data, in 2021, India’s ethanol blending rose substantially from 0% in 2013 to 5% in 2020 and close to 10% in late 2021, indicating greater emphasis on sustainable transportation fuels.

India Flexfuel Cars Market Opportunities:

• Leadership in emerging market segment: As a first mover, Indian automakers have the chance to establish leadership in the nascent but high-potential flex-fuel segment. Early investments in R&D and capacity can help OEMs gain significant market share before global rivals intensify focus. Developing innovative and price-competitive flexfuel options for India's value-conscious buyers also allows capturing share. According to India's Ministry of Petroleum and Natural Gas, the government has set a target of supplying 20% ethanol blended petrol at all petrol pumps in India by 2025. This will create a thriving market for flexfuel vehicles that can make optimal use of the inexpensive and cleaner ethanol-gasoline mix.
• Export potential: India can also emerge as a manufacturing and export hub for cost-efficient flexfuel vehicles and components, servicing demand in Asia Pacific, Africa and Latin America. Export offerings that are tailored for price-sensitive emerging markets can further strengthen India's position in the global auto industry. According to data provided by the International Energy Agency (IEA), global ethanol production increased by 22% from 2017 to 2020. While the U.S.remains the top producer, output is growing rapidly in nations like India and Brazil to serve evolving clean transport policies.
• Transition to sustainable mobility: The pivot towards flexfuel vehicles can accelerate India's shift to sustainable mobility. This presents opportunities across the value chain, renewable fuel production, distribution infrastructure, end-use vehicular technologies, battery electric flex-fuel hybrids etc. Strategic investments to build a holistic ethanol ecosystem will cement India's leadership. According to data provided by  the International Energy Agency (IEA), global ethanol production increased by 22% from 2017 to 2020. While the U.S. remains the top producer, output is growing rapidly in nations like India and Brazil to serve evolving clean transport policies.
• Rural markets: Flexfuel vehicles supported by biofuels align well with India's focus on rural development and self-reliance. Ethanol production utilizing agricultural feedstocks provides income opportunities for farmers. Compatible vehicles can allow rural consumers to reap financial benefits. India can showcase biofuels integration with farm and transport sectors. According to the data provided by the Ministry of New and Renewable Energy, Government of India, production of fuel grade bioethanol in India increased from 38 crore litres in 2019 to 120 crore litres in 2021.

India Flexfuel Cars Market Trends:

• Partnerships on fuel availability and distribution: To ensure fuel supply for fleets, OEMs are entering partnerships with oil marketing companies to set up ethanol pumps and co-develop distribution infrastructure in India. Efforts are ongoing to achieve pricing parity between petrol and ethanol. More tie-ups can accelerate rollout of fueling stations. According to the data provided by the Ministry of Petroleum and Natural Gas, number of operational E85 pumps in India has increased from just 63 in 2019 to over 500 in 2022.
• Shared mobility and ride-hailing fleets: Players like Ola (Ola Cabs offers to book cabs nearby your location for best fares. For best taxi service at lowest fares,) and Uber (provides ride-hailing services, food delivery, and freight transport) are deploying EVs in their fleet. Shared mobility operators may adopt flexfuel models to reduce fuel costs. Partnerships with OEMs can optimize such vehicles for durability and low maintenance. Till2022, Ola has committed in transitioning its entire fleet to electric vehicles while also adding E20 (20% ethanol blended petrol) compatible vehicles. Uber too plans to have 50% of its corporate car leases in India by 2025.
• Two-wheeler flexfuel models: Two-wheeler OEMs like Hero MotoCorp (an Indian multinational motorcycle and scooter manufacturer), TVS (an Indian multinational motorcycle manufacturer) and Bajaj Auto (It manufactures motorcycles, scooters and auto rickshaws) have started testing flexfuel prototypes to enter this segment. Significant two-wheeler volumes will bolster ethanol demand. Affordable two-wheeler E85 options can make the benefits more accessible. According to the data provided by the Ministry of Petroleum and Natural Gas, Government of India, sales of ethanol blended petrol have increased from 38 crore litres in 2019 to 140 crore litres in 2022.
• Retrofit conversions: Companies are providing aftermarket conversion kits to modify existing vehicles to flex-fuel compatibility. These low-cost retrofits allow consumers to switch to ethanol blends while retaining petrol compatibility. According to the data provided by the Ministry of Road Transport and Highways, over 250,000 conversions to Compressed Natural Gas or Liquefied Natural Gas (CNG/LNG) had taken place in India till 2021 through recognized conversion centers.

India Flexfuel Cars Market Restraints:

• Consumer Perceptions and Low Awareness: Limited awareness about flex-fuel benefits exists among Indian consumers presently. Perceptions associated with ethanol vehicles’  poor performance need to be overcome through education initiatives. Test drive experiences can demonstrate capabilities and build confidence. According to the data provided by the Ministry of Petroleum and Natural Gas, only 137 petrol pumps across 9 states offer E100 fuel in India till January 2023. This is negligible as compared to more than 60,000 fuel stations across the country. One strong consumer perception to tackle is the notion that new vehicle technologies are expensive.
• Counterbalance: Showcasing the long-term cost benefits of Flexible fuel vehicles (FFVs), including the lower cost of ethanol as compared to petrol and diesel, could help sway consumer opinion.
• Higher vehicle cost: The incremental cost for flex-fuel compatible components and advanced fuel systems increases upfront vehicle cost, which can deter price-sensitive buyers. Higher production scales can help lower costs. Government incentives on flex-fuel models will improve affordability. According to data provided by the World Bank, in 2021, India's per capita income was only US$2,122 which puts expensive flexfuel technologies out of reach for most voters.
• Counterbalance: Working with automotive manufacturers to increase the production of FFVs locally can help in overcoming the restraint. Higher production volumes can lead to economies of scale, reducing the per-unit manufacturing cost, which can be passed on to consumers.
• Underdeveloped infrastructure: A key barrier is lack of adequate ethanol pumping stations for retail fuel distribution. Concerted efforts are required to establish supply chains and scale up fuel production using renewable feedstocks. A sufficient charging network can be enabled through collaborative investments. Till March 2022, there were only 276 operational ethanol pumps in the country. According to a study by the World Resources Institute, India will need at least 25,000 E85 pumps by 2030 to achieve its target of 20% ethanol blending.
• Counterbalance: A phased approach should be targeted, starting with regions with high vehicle density or those closer to ethanol production facilities, to build and demonstrate the success of the required infrastructure.

Recent Developments New product launches

• In 2022, Maruti Suzuki (The Company is engaged in the business of manufacturing and sale of passenger vehicles in India.) launched the E85 compatible Wagon R Flex Fuel prototype model, thus making it the first Indian automaker to unveil a flex-fuel car. This highlights Maruti's focus on sustainable mobility solutions.
• In 2021, Hero MotoCorp (an Indian multinational motorcycle and scooter manufacturer) unveiled its Xpulse 200 T BS-VI motorcycle model capable of running on multiple fuels including ethanol blends. This move aligns with Hero MotoCorp's commitment to sustainable mobility.
• In 2019, TVS Motor Company (an Indian multinational motorcycle manufacturer) showcased its flex-fuel motorcycle Apache RTR 200 Fi E100, featuring first-of-its-kind flexible fuel technology. This demonstrates two-wheeler OEMs' growing interest in alternative fuels.

Acquisition and partnerships

• In 2022, OMCs IndianOil, HPCL (Hindustan Petroleum Corporation Limited is an Indian public sector undertaking in petroleum and natural gas industry) and BPCL (Bharat Petroleum Corporation Limited is an Indian public sector undertaking under the ownership of the Ministry of Petroleum and Natural Gas, Government of India.) partnered with automaker TVS Motor (an Indian multinational motorcycle manufacturer)  to set up flex-fuel pumps in India, aiming to accelerate adoption of biofuels
• In 2022, Mahindra & Mahindra (an Indian multinational automotive manufacturing corporation) announced a partnership with Ontario-based FuelMaker Corporation (The company's line of business includes the manufacturing of motor vehicle parts and accessories.) to boost access to biofuels for Indian consumers through fuel dispensers
• In 2021, Hero MotoCorp (an Indian multinational motorcycle and scooter manufacturer) invested in Ather Energy, an Electric vehicle (EV) start-up, to jointly develop electric two-wheelers powered by flex-fuel technology.

Figure 2. India Flexfuel Cars Market Share (%), By Vehicle Type, 2023

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Top Companies in India Flexfuel Cars Market

• Maruti Suzuki
• Hyundai
• Tata Motors
• Mahindra & Mahindra
• Toyota
• Honda
• Ford
• Volkswagen
• Nissan
• Renault

Definition: The India flexfuel cars market refers to the market for automobiles including passenger cars, commercial vehicles, and two-wheelers that can operate on flexible fuel blends in India. Flexfuel or flex-fuel vehicles use an internal combustion engine and advanced fuel systems that allow seamless switching between unleaded gasoline and ethanol blends up to 85% ethanol.

Flexfuel or flex-fuel vehicles can run on more than one fuel type and is typically used to describe automobiles with internal combustion engines that can use a mixture of unleaded gasoline and ethanol, an alcohol fuel made from crops such as corn and sugarcane. The key advantage of flexfuel cars is that they provide fuel flexibility and cost savings for consumers, as ethanol is cheaper than gasoline. The market growth is driven by rising fuel prices, supportive government policies for ethanol blends, and increasing environmental consciousness among consumers.

India flexfuel cars market is segmented into fuel type, vehicle type, technology, and distribution channel. By fuel type, the E85 segment accounts for the largest share. E85 is a blend of 85% ethanol and 15% gasoline and offers the highest ethanol content for flex-fuel vehicles. Its adoption is increasing due to good engine performance and lower emissions.