A major automobile hub, the state accounts for nearly 20% of vehicles manufactured in India and transitioning this sector to cleaner technologies like EVs will be crucial for strengthening climate action
India is the third-largest automobile market in terms of vehicles sold, with the industry accounting for 7.5% of the national Gross Domestic Product and 49% of the manufacturing sector’s GDP. Maharashtra, whose industrial economy relies significantly on the automobile sector and contributes nearly 7% to the gross state domestic product (GSDP), accounts for nearly 20% of the vehicles manufactured in India, according to a report by iFOREST.
Spurred by the rise in ownership of personal vehicles and overall demand for vehicles, road transport in the state is also the second-largest CO2-emitting sector, contributing to 12.2% of the total emissions in 2021-22.
As the country manoeuvres swiftly towards a transition towards electric mobility in the automobile sector, thanks to the hand holding policies of the government, the transformation of this industry in Maharashtra becomes imperative not only to herald growth opportunities and decarbonisation of the sector but also taking an important step towards significant climate action. “Maharashtra, India’s automobile hub, remains a front-runner in the transition from internal combustion engine (ICE) vehicles to EVs given a conducive policy environment and industry investments”, states the report – Navigating the shift - A just Transition roadmap for Maharashtra’s automobile sector.
According to the latest Economic Survey, the domestic EV market is projected to grow at a compound annual growth rate (CAGR) of 49% between 2022 and 2030, by which annual electric vehicle sales are estimated to reach around 10 million. Maharashtra has already emerged as one of the front-runners in India’s EV transition, increasing its penetration from just 0.4% share of all vehicle sales in 2020 to 7.6% by 2023.
The state also recorded the highest sales of EV cars and two-wheelers (2Ws) in the country. Overall, the state accounted for a total of 191,696 EV sales in the passenger vehicle segment— 2Ws, three-wheelers (3Ws), and four-wheelers (4Ws)—which is 12.6% of India’s total and second highest in the country. Considering only 2W and 4W sales, Maharashtra topped the chart, it said.
Fig 1: The assembly line at Mercedes-Benz India in Pune. Pic : Tom Parker
Significance Of Transition To Electric Vehicles In Maharashtra
Maharashtra’s industrial economy depends heavily on the automobile industry. Maharashtra has 16,602 enterprises involved in the manufacturing of automobiles and automobile components, that includes 26 original equipment manufacturers (OEMs) and 16,576 auto component manufacturers (ACMs).
Of the ACMs, about 79.5% are micro-enterprises and 17.8% are small enterprises. Overall, 97% of all automobile enterprises in Maharashtra are small and micro-scale. These industries are located in seven industrial clusters spread across the state but over 90% of them are concentrated in just five sectors -- Pune, Mumbai, Aurangabad, Nashik, and Nagpur – Pune being the largest hub.
This sector in the state provides direct employment to at least 3.4 lakh people in the state, both formal employees and those employed through contractors. However, a iFOREST survey in Pune indicates that there are a significant number of informal workers associated with the sector, particularly in the MSMEs, who are not counted in the employment statistics.
Most importantly, the policy environment for EV adoption has been particularly strengthened since 2021 with the enactment of the Maharashtra EV Policy and the central government’s Faster Adoption and Manufacturing of Electric Vehicles in India (FAME) scheme II.
“Over the last five years, Maharashtra has received I1,111.4 crores from FAME II scheme (since. the scheme's inception in 2019 until December 2023), combining various vehicle segments. This is about 17.4% of the total disbursal (I6,308 crores) under FAME II to various states,” says the report. Therefore, this transformation comes with its share of challenges for businesses, the workforce and the environment.
Fig 2: Workers at a factory in Maharashtra. Pic: Jignesh Mistry
How Will This Transformation to EVS impact The Automobile Industry In Maharashtra
The transition will have its impact on various segments of the value chain – OEMs, workforce and automobile clusters among others. We list a few below:
- The shift from traditional gasoline to electric vehicles will render 45-84% of parts of ICE vehicles obsolete, thus hugely impacting the manufacturers.
- The small and micro enterprises comprising 97% of the state's automobile manufacturing segment will become vulnerable owing to constraints in financial resources and limited capacity of technology adoption for transitioning to the EV ecosystem.
- The shift from ICE vehicles to EVs will have a significant impact on the over 3.3 lakh strong workforce employed in ICE vehicle manufacturing and those engaged in the value chain. Estimates reveal that around 31% of the job roles in the ICE ecosystem will be affected – 14% will become obsolete and 17% will require reskilling.
- The transition will also impact certain districts and auto clusters.
The Road To ‘Just Transition’ Of The Automobile Sector In Maharashtra
The report highlights that four key pillars will aid this transition towards a sustainable and inclusive future –
- Technology and Skilling: This will help in making skilled workforce available that will be equipped to handle the evolving demands.
- Vibrant green manufacturing: Will help in growth and position India as the hub of green automobile manufacturing.
- Sustainable mobility choices: Transition to mobility as a Service (MaaS) will promote sustainable urban mobility and reduce congestion and pollution.
- Green energy and material circularity: Help in reduction of life cycle impact of EVs.
Apart from these four keys, it will also be necessary to involve all stakeholders both at the state as well as the district level so that an exhaustive framework can be developed covering all important components. To develop a comprehensive framework, it will also be necessary for the state to bring about necessary reforms in existing policies, formulate cluster transition plans, appoint special bodies to hold engagements with state authorities on measures being implemented and provide funds to hand hold enterprises.
At the same time, the industry bodies can also collaborate with the state government to play a pivotal role in putting in place the transition measures. The report also advocates the formulation of a dedicated workforce transition policy to support those who will be impacted by the transition. “Transition of the existing workforce to the new EV ecosystem to retain jobs, and increasing employability of the future workforce lies at the core of ensuring a just transition of the automobile sector.
“The government can develop a comprehensive workforce transition policy to address interventions required by the government and enterprises, such as skilling and other transition support, and improvement of foundational skills, among others. Women should be a key focus of workforce transition,” it argues.
All these measures will not be fruitful if a holistic approach, that considers the entire lifecycle of EVs and addresses energy and material use at every stage, is implemented. “Using renewable-based energy will be essential to minimise the carbon footprint of EVs. Similarly, sustainable mining practices for extracting raw materials for battery manufacturing, battery recycling, and research into alternative battery chemistries with fewer rare or toxic materials will be essential for reducing material extraction and use and overall environmental impacts.” the report added.
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