No Single Fuel Can Drive India's Auto Transition: TERI Study

India needs to revisit its automobile fuel policy and adopt a differentiated approach to cleaner mobility, with electric vehicles, compressed natural gas (CNG), compressed biogas (CBG) and liquefied natural gas (LNG) playing complementary roles across vehicle categories, according to a new study by The Energy and Resources Institute (TERI).

The study, Comparative Assessment of Vehicular Fuels in India's Energy Transition: A Multi-dimensional Approach, finds that no single fuel or propulsion technology consistently performs favourably across all vehicle segments and evaluation parameters. Instead, the choice depends on ownership costs, environmental impact, vehicle utilisation, infrastructure availability, payload requirements and energy security.

Under current Indian conditions, electric mobility offers favourable economics for two-wheelers, three-wheelers and certain urban applications, while CNG provides a competitive combination of affordability, life-cycle environmental performance and operational practicality across passenger cars, taxis, buses and several light commercial vehicle applications. LNG also has a potential role in long-haul freight, where range, payload and refuelling time remain important considerations.

The findings form the basis of TERI's recommendation for a fresh, technology-neutral national fuel framework, including a comprehensive review of India's Auto Fuel Vision and Policy, last reviewed in 2014. The institute has called for future policy decisions to recognise life-cycle emissions, air-quality impact, energy efficiency, resource availability and overall sustainability rather than relying on a single fuel pathway.

The assessment examined petrol, diesel, CNG, electricity and LNG across six vehicle categories: two-wheelers, three-wheelers, private four-wheelers, commercial four-wheelers, LCVs and heavy-duty vehicles. It covered current conditions and transition scenarios for 2030, 2040 and 2050, supported by a survey of 2,315 vehicle owners and drivers across ten locations.

Unlike studies focused primarily on emissions or operating costs, TERI combined five dimensions covering economics, environment, technology, social considerations and geopolitical risks through a multi-criteria analytical framework.

CNG Retains a Significant Role in Passenger Vehicles

One of the study's key findings is the continuing relevance of CNG, particularly in the near and medium term.

TERI found that CNG offers a competitive balance of ownership costs, environmental performance, infrastructure readiness and user acceptance for private passenger cars. Electric vehicles, meanwhile, face constraints related to initial purchase cost, financing, charging availability and relatively low utilisation in private applications.

The report nevertheless projects that electric cars will strengthen their position as charging infrastructure expands, battery technology improves and the electricity mix becomes cleaner. CNG is expected to remain an important complementary fuel rather than being immediately displaced by electrification.

The findings come at a time when CNG has been steadily increasing its presence in India's passenger vehicle market.

According to FADA, CNG's share of passenger vehicle retail rose to 21.98% in FY26 from 19.60% in FY25. Of the 47.05 lakh passenger vehicles retailed during the year, approximately 10.34 lakh were CNG-powered. Diesel accounted for 18.08% of registrations, while electric passenger vehicles held a 4.25% share.

The expanding gas distribution network is another factor supporting adoption. According to the Petroleum Planning and Analysis Cell (PPAC), India had 9,096 CNG stations as of July 31, 2026.

TERI, however, cautions that infrastructure readiness should not be judged solely by the number of stations. Their location, accessibility, operating capacity, and the time required for charging or refuelling also determine how effectively a particular technology can serve customers.

EV Economics More Favourable for Two- and Three-Wheelers

The findings differ considerably when the assessment moves to smaller vehicles.

TERI found that electric two-wheelers and three-wheelers have favourable total ownership costs, supported by lower energy and maintenance expenditure. Their economics become particularly attractive in high-utilisation applications, where operating savings can offset higher initial acquisition costs relatively quickly.

The study identifies two-wheelers as an EV-led transition segment over the long term. In three-wheelers, it sees CNG and electric vehicles coexisting during the transition, with electrification strengthening as infrastructure and technology improve.

The role of economics is significant in the overall findings. Economic considerations received the highest combined weight of 31.49%, followed by environmental factors at 22.34%, technical considerations at 21.25%, social factors at 13.87%, and geopolitical considerations at 11.05%.

TERI said this weighting reflects the importance of affordability and practical operating costs in India's mass-mobility market.

The transition becomes more gradual in larger vehicles, where battery size, vehicle weight, range and the availability of charging infrastructure influence commercial viability.

For commercial four-wheelers such as taxis and fleet vehicles, the report sees EV competitiveness improving more rapidly than in privately owned cars because higher annual utilisation increases the value of lower running costs. CNG, however, retains a significant complementary role.

In urban and regional LCV operations, TERI also expects EVs to strengthen over the longer term, particularly where vehicles can rely on predictable routes and fleet charging.

Environmental Assessments Beyond Tailpipe Emissions

Another important conclusion relates to how the environmental performance of vehicle fuels is measured.

TERI argues that assessments based solely on tailpipe emissions provide an incomplete picture. Its life-cycle analysis considers fuel production, electricity generation, vehicle manufacturing, operation and end-of-life impacts, alongside environmental indicators such as global warming potential, particulate matter, human toxicity, resource consumption and waste generation.

Under the current Indian electricity mix and the environmental indicators examined, the study found that CNG generally demonstrated a lower overall environmental burden across several vehicle categories.

Electric vehicles perform favourably in terms of operational air pollution because they have no tailpipe emissions. However, TERI said their broader life-cycle performance remains sensitive to electricity generation, battery manufacturing, material requirements and battery circularity.

Diesel-based mobility choices, meanwhile, performed relatively poorly in the study's combined environmental assessment.

CBG Blending Could Strengthen CNG's Environmental Case

The study also identifies compressed biogas as an important opportunity to reduce the environmental footprint of India's existing natural-gas vehicle ecosystem.

According to TERI's assessment, blending 20% carbon-negative CBG with CNG could make the resulting fuel carbon-neutral on a life-cycle basis, under the assumed CBG production pathway.

This provides an additional opportunity to decarbonise existing gas-powered mobility without necessarily requiring immediate replacement of the entire vehicle or refuelling infrastructure.

The finding is relevant to the Centre's ongoing efforts to scale up domestic CBG production. In August 2026, the Union Cabinet approved the ₹23,731-crore GOBARdhan National Unified Scheme for Compressed Biogas, which includes an assured offtake framework intended to strengthen project viability.

The government's notified CBG obligation for the city gas distribution sector is 3% in FY27, rising to 4% in FY28 and 5% from FY29 onwards for the CNG transport and domestic PNG segments.

TERI's modelled 20% blending scenario is therefore considerably above the presently notified obligation. Achieving such a scenario would require further growth in domestic CBG production, reliable feedstock availability and integration with existing gas networks.

Heavy Trucks Present a Different Challenge

For heavy-duty freight, TERI identifies a different set of technological and commercial considerations.

Although electric trucks offer lower operating energy costs and eliminate tailpipe emissions, the report notes that battery weight, vehicle acquisition cost, charging duration and infrastructure requirements can affect their commercial viability, particularly in long-haul applications.

As an example, TERI's representative comparison of 55-tonne heavy-duty vehicles found an electric truck had an unladen weight of approximately 8.8 tonnes, compared with 7.1 tonnes for an LNG-powered truck.

The additional 1.7 tonnes of unladen mass reduces the weight available for useful cargo at an equivalent gross vehicle weight, affecting the economics of freight operations.

The study consequently identifies CNG as a continuing pathway for regional freight and LNG as a potential option for suitable long-haul applications, while battery-electric heavy-duty vehicles are expected to remain more application-specific under the conditions assessed.

However, this is an assessment of the combined commercial, technical and environmental suitability of the technologies, not a prediction that electric trucks will remain commercially unviable throughout the transition.

Fuel Infrastructure Must Match Actual Vehicle Usage

TERI also calls for a change in how India plans charging and refuelling infrastructure. The report argues that infrastructure readiness should be evaluated through geographical distribution, service capacity, operating time and accessibility rather than the absolute number of stations installed.

It identifies Delhi as relatively well positioned for CNG infrastructure, while Delhi and Bengaluru perform relatively strongly in EV infrastructure among the locations assessed. Mumbai has an extensive conventional-fuel network, but effective CNG and EV service capacity is more constrained once geographical accessibility and service time are considered.

Smaller locations such as Lucknow, Guwahati, and Dhanbad face comparatively greater charging infrastructure limitations under the study's methodology.

TERI recommends infrastructure planning based on actual vehicle usage, including distributed charging for two-wheelers, depot charging for commercial fleets and corridor-specific infrastructure for long-haul freight.

Electrification Changes, Rather Than Eliminates, Import Dependence

The report also examines the implications of competing technologies for India's energy security. While electric mobility can reduce direct dependence on imported crude oil and other conventional fuels, it creates greater exposure to batteries, critical minerals and globally concentrated component supply chains.

TERI specifically identifies lithium, cobalt, nickel and graphite as materials that could introduce additional strategic vulnerabilities if domestic capabilities and supply-chain diversification do not improve.

CNG and LNG, meanwhile, can reduce direct petroleum dependence but retain exposure to natural-gas supply chains and international prices.

The report consequently recommends stronger battery-material localisation, diversified sourcing, domestic manufacturing, recycling and material recovery, alongside measures to expand domestic alternative-fuel production.

Call for a New Auto Fuel Policy

The study's recommendations come as India prepares to implement its third phase of Corporate Average Fuel Economy (CAFE III) norms from April 2027.

Notified by the Ministry of Power on September 29, the new framework gives battery-electric and range-extended electric vehicles a threefold volume multiplier for compliance calculations. It also recognises other powertrain pathways, including strong hybrids, flex-fuel ethanol and CNG, through separate provisions.

For CNG vehicles, the framework provides a carbon-neutrality factor of 5% or the notified CBG blending percentage, whichever is higher.

While CAFE III focuses on manufacturers' fleet-average fuel consumption, TERI's recommendations call for a wider assessment of transport fuels based on their complete environmental, economic and energy-security characteristics.

The institute has proposed that India update its Auto Fuel Vision and Policy to reflect technological and energy-sector changes since the previous review in 2014.

Its recommendations include a differentiated policy for individual vehicle categories, continued development of CNG and CBG infrastructure where justified, selective LNG corridors, electricity-sector decarbonisation, battery circularity and the creation of a stronger secondary market for electric vehicles.

TERI has also called for bringing natural gas under the Goods and Services Tax regime to replace the existing fragmented state-level VAT structure, alongside incentives based on ownership economics and actual vehicle utilisation rather than relying primarily on purchase subsidies.

The larger implication of the study is that India's clean-mobility transition is unlikely to proceed uniformly across vehicle categories. Technologies that work economically and operationally for urban two-wheelers may not address the requirements of privately owned cars, commercial fleets or long-haul trucks.

As the electricity grid becomes cleaner, vehicle costs change and fuel infrastructure expands, the relative suitability of competing technologies will also evolve.

For policymakers and manufacturers, TERI's findings therefore underline the need to plan the transition around specific vehicle applications, investment requirements and operating conditions, rather than assuming that one propulsion technology can address the needs of India's entire road transport sector.