India’s ethanol strategy: Automakers treading cautiously, consumers remain unconvinced and experts are wary

Synopsis

With the rollout of E85 fuel and policy changes to support mass flex-fuel deployment, the government is attempting something few large economies have tried—decarbonising road transport while extending the life of the internal combustion engine (ICE). This sets India apart from China and Europe, where cleaner mobility has consistently meant shifting away from conventional engines.

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Mumbai: India is charting a mobility transition unlike any other major automotive market like China and Europe, building a future where electric vehicles and ethanol-powered internal combustion engines co-exist rather than compete.

This sets India apart from China and Europe, where cleaner mobility has consistently meant shifting away from conventional engines.

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However, even as the government pushes ahead, automakers are treading cautiously, consumers remain unconvinced, and experts warn that flex fuel should complement, not replace, India's broader clean mobility strategy.

The latest trigger is the rollout of E85 fuel, containing 80-85% ethanol, at 48 retail outlets, with plans to expand the network to 500 stations by the end of 2026 and about 5,000 by 2027.

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The move follows India's nationwide transition to E20 petrol and marks the next phase of its ethanol roadmap. At the same time, the government is moving to formally include higher ethanol blends such as E85 and E100 in automotive fuel regulations, laying the groundwork for flex-fuel vehicles.

Measured Transition

Yet experts emphasised that the transition must be measured.

"India has drawn the right lesson from global experience,” said Randheer Singh, founder of ForeSee Advisors and former director of Electric Mobility at government think-tank NITI Aayog. “But flex fuel should not be forced across the country. It should be used where the economics and ethanol supply already support it. That means sugar and ethanol surplus states such as Maharashtra, Uttar Pradesh and Karnataka, where local supply chains are already in place and demand can be built gradually."

Singh said E20 should remain India's national priority since it complies with existing vehicle fleet and delivers immediate scale. Flex fuel, he argued, should only be developed as a regional solution that absorbs genuine ethanol surplus, strengthens energy security, and supports farm incomes, and shouldn’t be forced into a nationwide mandate.

Automakers echo a similar caution, stating that the engineering challenge is no longer the biggest hurdle.

"Engineering isn't the problem anymore," said a senior executive at a passenger vehicle maker, requesting anonymity. "Consumer confidence is. People want to know whether they'll find the fuel, whether mileage will suffer, and whether the economics will work. Until those questions are answered, adoption will remain gradual."

Another senior executive at a leading carmaker said India is attempting to compress a behavioural transition that took countries like Brazil decades to achieve.

"Consumers are only beginning to understand E20,” the executive said. “Higher ethanol blends mean another shift in fuel habits. Infrastructure, affordability and confidence will have to evolve together."

NEW FUEL ECOSYSTEM CHALLENGES

The concerns underscore the balancing act facing policymakers. Unlike battery-electric vehicles where consumers adopt an entirely new technology, flex-fuel vehicles require buyers to embrace a new fuel ecosystem while continuing with conventional engines. Higher upfront vehicle prices could also weigh on early demand.

Still, industry executives believe India has compelling reasons to pursue the ethanol route.

Instead of entirely replacing engines, flex-fuel technology adapts existing platforms to run on varying blends of petrol and ethanol, letting automakers to leverage investments already made, while allowing India to reduce oil imports and lower vehicular emissions.

"China's transition is driven primarily by battery-electric vehicles,” said Ravi Bhatia, president, Jato Dynamics. “Europe has used regulation to accelerate a similar shift. Brazil remains the only large market where ethanol has become a mainstream transport fuel. India is now attempting to build a comparable ethanol ecosystem, but in a much shorter time frame and alongside electrification rather than instead of it."

Maruti Suzuki unveiled a flex-fuel Wagon R hatchback earlier this month, while Hero MotoCorp introduced ethanol-compatible motorcycles. Toyota and Honda have also showcased flex-fuel technologies, signalling growing industry readiness, although commercial deployment is expected to remain gradual.

Deepak Ballani, director general of the Indian Sugar & Bio-Energy Manufacturers Association, said ethanol availability is unlikely to become a bottleneck as there is surplus domestic production capacity and multiple feedstocks.

"Oil marketing companies have not lifted the entire allocated quantity,” he said. “Supply is not the issue.”

He acknowledged, however, that flex-fuel vehicles are pricier than conventional models, and consumer resistance is likely in the initial years. The industry has sought a 5% goods and services tax (GST) for flex-fuel vehicles, similar to the concession available for EVs, to improve affordability. Conversion kits for older vehicles are also being explored as another way to accelerate adoption.

SUGARCANE, MAIZE DEMAND

Beyond transport, higher ethanol blending could create additional demand for sugarcane and maize, reduce reliance on imported crude, and strengthen rural value chains.

Bhatia believes the domestic auto industry's future won’t be defined by a single technology.

"The future mobility landscape is unlikely to be defined by one technology alone,” he said. “EVs, hybrids, hydrogen, and biofuels will coexist across markets, and manufacturers will have to balance infrastructure readiness, fuel availability and consumer acceptance."

Unlike China, which has overwhelmingly bet on battery-electric vehicles, or Europe, where regulation is steadily shrinking the role of the combustion engine, India is attempting something far more complex—decarbonising transport, while preserving, and reinventing its existing ICE ecosystem through ethanol.

Whether consumers embrace that hybrid transition may ultimately determine whether India creates a new mobility model or simply prolongs the old one, said experts.

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