Beyond climate: Why EVs are an economic and strategic imperative for India

Rapid EV adoption represents a rare win-win: lower running costs for customers, enhanced profitability for OEMs and reduced oil import dependence for the nation.

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India’s most critical energy challenge today is the continued dependence on imported crude oil. While new energy vehicles, including EVs are often viewed through the lens of sustainability, mobility choices also play a contributory role in shaping India’s economic resilience, FOREX exposures, and strategic autonomy.

In CY2025 alone, India imported crude oil worth approximately $140 billion, representing 4 per cent of our GDP. This is not merely an energy statistic, but an indicator of a deeper structural dependence with economic and strategic consequences. Each spike in global oil prices, geopolitical disruptions and supply-chain uncertainties translates into direct pressures on India’s trade balance, inflation and growth momentum.

At a time of heightened geopolitical uncertainty and energy realignments across the world, reducing oil dependence is no longer optional, but is a strategic necessity. EVs are not only about cleaner air, but also about economic discipline, energy security and national self-reliance.

Encouragingly, India’s renewable energy sector has made remarkable progress in strengthening the country’s energy security. India’s renewable power generation, across solar, wind, hydro and bioenergy, recorded a historic increase of 98 TWh, marking a 24 per cent YoY growth, more than double the previous peak recorded in 2022. Notably, the increase in clean energy generation was twice the growth in energy demand, which stood at 49 TWh.

Consequently, India ranks fourth in the world with a remarkably low Grid Emission Factor (GEF) of 0.712 kg CO2/kWh, Solar energy, in particular, has emerged as the dominant driver for this transformation. According to a research report by Ember, India recorded the world’s third-largest increase in solar generation in 2025, adding 53 TWh in a single year. Solar generation grew by 37 per cent, exceeding the global average of 30 per cent. This surge was driven by a record addition of 38 GW (AC) of solar capacity, enabling India to surpass the US in annual solar capacity for the first time.

As renewable energy becomes increasingly abundant and affordable, EVs offer citizens a direct pathway to participate in India’s energy transition. Rapid EV adoption represents a rare win-win: lower running costs for customers, enhanced profitability for OEMs and reduced oil import dependence for the nation. The EV value proposition has also matured significantly.

With technology becoming increasingly democratized, EVs today are being offered at price points and performance levels comparable to ICE vehicles. Innovative ownership models, such as BaaS, have further lowered entry barriers by separating battery costs from the body shell. Advances in battery management systems have improved real-world driving range, while the rapid expansion of public charging infrastructure along key urban centres and highway corridors has meaningfully reduced range anxiety.

Perhaps most compelling, however, is the economic case at household levels. Compared to ICE vehicles, EVs deliver substantially lower costs of ownership. Furthermore, in tier 1, 2 and 3 cities, where individual homes remain prevalent, EV owners have an added advantage. By installing roof-top solar panels, these customers can operate their EVs at near-zero energy cost. This significantly shortens the break-even period for EV ownership, as compared to fossil fuel powered vehicles.

The macroeconomic implications are equally compelling. Based on a conservative inference, if electric cars accounted for 10 per cent of new passenger vehicles sales in CY2025 (total 5 Mn units in CY25), electrifying 4-5 lakh vehicles in 2025 would reduce oil consumption by around 0.4 Bn litres annually. Taking $80-85 per barrel as an average cost of crude in 2025, it would translate into $200-250 Mn in annual import savings, from just one year of incremental adoption of electric cars.

Now consider the cumulative impact. As EV penetration expands to 25-30 per cent across passenger vehicles, commercial vehicles, two and three wheelers, the scale of avoided foreign exchange outflows becomes transformational. Every kilometer driven on electricity generated within India displaces imported fuel, strengthens energy sovereignty and enhances macroeconomic resilience.

(Disclaimer-The article is authored by Alekhya Datta, Director, Electricity and Renewables Division, TERI. The views and opinions expressed are solely those of the author. ETAuto does not endorse or take responsibility for the content.)