Dawn of EV fans in India expect fuel demand could peak earlier

India, one of the world’s fastest-growing oil markets, has lagged behind major economies in Europe and Asia in adopting electric vehicles, but sales are now picking up and investment in new car production and energy infrastructure is accelerating.

Faster-than-expected industry growth means gasoline consumption in India will peak earlier than previously expected, forcing top oil companies to speed up transformation plans into alternative business lines, especially increased petrochemical manufacturing, some analysts and industry players said.

“We expect peak gasoline demand to occur around 2040 to 2045, but given the trends and pace of our development ecosystem around electric vehicles, the peak will be in the mid-2030s,” said Debasish Mishra, Partner, Energy, Resources and industry, Deloitte India told Reuters. He expects diesel demand to peak at the same time as gasoline demand.

An industry source at an Indian oil refinery told Reuters the slowdown in fuel demand would be pronounced by around 2030 as electric vehicle technology stabilizes compared to an earlier forecast for the 2040s, adding that the heavy-duty trucking industry Changes will occur at a later date.

“Refiners are already investing in petrochemical consolidation in response to potential losses in fuel demand,” said the source, who asked not to be named because he was not authorized to speak to the media.

About 90% of India’s petrochemicals demand is currently met by China, so a shift by Indian refiners to domestic chemicals demand could dramatically alter supply dynamics, he said.

Indian refiners are investing billions of dollars to boost petrochemical capacity. India’s largest refiner, Indian Oil Corp, is boosting petrochemical capacity at its Panipat refinery by 13% and building new plants linked to its Paradip and Gujarat refineries.

Reliance Industries Ltd, operator of the world’s largest refinery, plans to invest 750 billion rupees ($9.38 billion) to expand its chemicals business, while Essar Group plans to build a 400 billion rupees petrochemicals plant in eastern India.

Nayara Energy expects to build 15-20 new integrated petrochemical plants in the next ten years.

Electric cars, trucks

China currently dominates global electric vehicle production, and domestic adoption of new energy vehicles is also advanced. The China Travel Association predicts that sales of new energy vehicles, mainly electric vehicles, will reach 8.5 million this year, accounting for 36% of all new sales.

Despite the new momentum in India, the question for the country is whether it will be enough to finally wean itself off fossil fuels.

“Limited charging infrastructure, low domestic EV production and high EV battery costs remain some of the major barriers to maintaining strong EV growth in the longer term,” said Dylan Sim, oil market analyst at FGE.

Compared with the world, India’s progress has been modest, but registered electric vehicles last year tripled from 2021 to 1.01 million, most of them two- and three-wheelers.

While EVs account for just 1 percent of the 3 million vehicles sold each year, New Delhi wants to increase that to 30 percent by 2030, with a slew of policies including tax breaks for consumers.

India’s state-owned refiner, which dominates fuel retailers, plans to install electric vehicle charging facilities at more than 22,000 gas stations and highways by 2024.

The private sector also offers hope for EV bulls.

Gurgaon-based ride-hailing service Blusmart has 3,000 electric vehicles and is growing rapidly.

It now offers 500,000 trips a month, up from about 35,000 when it started 2019, its co-founder Punit Goyal told Reuters.

Local automakers such as Tata Motors and Mahindra & Mahindra have invested heavily, while foreign players such as Kia and BYD have announced high-end models for the Indian market.

About 40% of India’s fuel needs are diesel, mainly for trucks.

Chetan Maini, chairman of Sun Mobility, which provides EV solutions, said small trucks in India, including three-wheelers, could be early adopters of the transition, given the cost advantages of e-commerce and courier companies.

His company currently has 80 battery swap stations for two- and three-wheelers in Delhi and plans to set up 200 by March.

“By 2030, a huge opportunity will be in trucking because the cost economics will be very efficient,” Maini said.

First published date: Jan 27, 2023 at 08:36 AM CST


Leave a Comment

Your email address will not be published. Required fields are marked *