Japan bets on cow dung and farm waste to fuel growth in India's car market

Japan is investing in India's automotive market by promoting biogas fuel derived from cow dung and farm waste. The two nations have launched an initiative to build 1,000 biogas plants across India by 2030, with the goal of fueling 2.5 million vehicles.

Maruti Suzuki, India's largest car manufacturer and a subsidiary of Japan's Suzuki Motor, has already approved four biogas projects totaling 5.61 billion rupees ($58.8 million) in the first phase of its expansion. This move aligns with India's potential for biogas adoption, supported by its vast agricultural sector, a growing fleet of compressed natural gas (CNG) vehicles, and a slower pace of electric vehicle (EV) uptake compared to global trends.

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Around half of India’s car market is priced below 1.5 million rupees, where customers need value-for-money choices and good mileage. Most hybrid and EV options are available above that price point, which makes CNG an important solution.

Analysts suggest that higher imported oil prices and the significant upfront cost of EVs make CNG vehicles increasingly attractive in India. Retail sales of CNG vehicles saw a nearly 17% year-on-year increase in June, capturing 24.3% of passenger vehicle sales, surpassing EVs at 7.8%. The cost-effectiveness of CNG is a major draw, with CNG cars typically costing less to fuel over distance than their petrol counterparts.

However, challenges persist. Translating these ambitions into reality will require overcoming fragmented supply chains and distribution hurdles in a country of 1.4 billion people. The technology itself is straightforward, converting agricultural waste and cattle dung into purified biogas for compatible CNG vehicles, while also producing organic fertilizer.

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Vehicle acquisition costs have risen because of tighter emission and safety norms, while high petrol prices have also increased running costs. CNG offers more.