Watch: Global oil crisis: Why is India’s transport sector far more exposed than China’s?
As crude oil prices surged nearly 67% in the weeks following the Strait of Hormuz closure (late February 2026), the differential impact on India and China's transport sectors became stark.
India, with 85%+ crude oil import dependency and a transport sector still overwhelmingly powered by petrol and diesel, faces compounding exposure: higher fuel costs for consumers, logistics inflation, and a cascading effect on manufacturing and food prices.
China, having executed a decade-long electric vehicle (EV) and battery industrialisation strategy, is comparatively insulated: battery-electric heavy-duty trucks crossed 50% of new sales in December 2025, and its coal and LNG import dependence has actually declined.
India's Oil Import Dependency: Structural Vulnerability
India is the world's third-largest oil consumer and imports over 88% of its crude oil requirement. The transport sector accounts for approximately 50% of India's total oil demand — making it the largest single petroleum consumer in the economy. Unlike China or Europe, India's vehicle fleet is still overwhelmingly internal combustion engine (ICE) based, with EVs at only 5% of new passenger car sales as of mid-2025.
Key Details
- India's crude oil import bill: approximately $130–150 billion annually in recent years; a 67% crude price spike translates to a potential $85–100 billion additional import burden on an annualised basis.
- India imports crude from over 40 countries as of March 2026, but 50–53% still originates from the Middle East (Iraq, Saudi Arabia, UAE, Kuwait) — all routed via Hormuz.
- A sustained $10/barrel crude price increase is estimated to widen India's Current Account Deficit (CAD) by approximately 0.4–0.5% of GDP and add ~30–40 paise to petrol/diesel retail prices (before any government tax adjustment).
India's high fossil-fuel transport dependency means crude price spikes translate directly into consumer inflation, freight cost increases, and fiscal pressure — unlike China where EV penetration buffers the impact.
China's EV Transition: A Structural Energy Security Hedge
China's electric vehicle revolution — supported by massive state investment, domestic battery supply chains (CATL, BYD), and policy mandates — has created a structural buffer against oil price shocks in the transport sector. In December 2025, battery-electric heavy-duty trucks (the segment hardest to electrify) crossed 50% of new sales in China. This is energy security by electrification.
Key Details
- China's EV market share in passenger cars exceeded 40% in 2025; India's was approximately 5% in the same period.
- China's CATL and BYD together control over 60% of global EV battery manufacturing capacity, giving China significant upstream insulation from energy transitions.
- As China's transport sector electrified, its coal imports fell ~10% year-on-year and LNG imports declined 10–15% — indicating a genuine decoupling from fossil fuel import dependency.
The contrast illustrates that energy security in the 21st century is being determined not just by military power or diplomacy but by domestic industrial policy on electrification — a lesson with direct relevance for India's policy choices.
India's EV Policy: FAME Scheme and the Road Ahead
The Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles (FAME) scheme, launched in 2015 under the National Electric Mobility Mission Plan (NEMMP), is India's primary policy instrument for EV promotion. FAME II (2019–2024) had an outlay of ₹10,000 crore, supporting demand subsidies for two-wheelers, three-wheelers, buses, and passenger cars. A successor scheme was under consideration for 2025 onwards.
Key Details
- FAME II priority: 7,000 e-buses, 5 lakh e-3 wheelers, 55,000 e-4 wheelers, 10 lakh e-2 wheelers — heavily weighted toward public/shared transport.
- India's EV sales reached approximately 1.67 million units in FY 2023–24; three-wheelers showed the highest electrification rate at 54%.
- Government 2030 targets: 30% EV share in private cars, 70% in commercial vehicles, 40% in buses, 80% in two- and three-wheelers — all heavily contingent on charging infrastructure rollout and battery price reduction.
India is generating more solar energy and electrifying transport faster than China did at an equivalent GDP per capita — but it is still years away from the scale of EV penetration that would meaningfully reduce oil price vulnerability.
Strategic Petroleum Reserves: India's Existing Buffer
India's Strategic Petroleum Reserves (SPR) are underground rock caverns at Vishakhapatnam (Andhra Pradesh), Mangalore, and Padur (Karnataka), with a combined capacity of 5.33 million metric tonnes. As of March 2026, they can cover approximately 9.5 days of national crude demand — far below the IEA's recommended 90-day minimum for member countries.
Key Details
- India is not an IEA member (though it has association status since 2017) and is not obligated to maintain 90-day reserves.
- The government has proposed expanding SPR capacity at Chandikhol (Odisha) and Padur Phase II, which would add ~6.5 million MT capacity.
- India released strategic reserves in coordination with the IEA in November 2021 (30 million barrels global release), signalling willingness to use SPR as a price management tool.
India's ~9.5 days of SPR coverage is dangerously thin in the face of a prolonged Hormuz closure; the contrast with China (which has built strategic reserves equivalent to ~90 days) underscores the infrastructure gap.
- Crude price surge: from ~$80/barrel to ~$134/barrel (67% increase) within weeks of the February 28, 2026 Hormuz closure.
- India crude import dependence: 88%+ of total crude requirement; ~50–53% from Middle East via Hormuz.
- India's EV new car sales share: ~5% (mid-2025); China's: ~40%+ (2025).
- China battery-electric heavy-duty trucks: crossed 50% of new sales in December 2025.
- India's FAME II: ₹10,000 crore outlay (2019–2024); focused on buses, two-wheelers, three-wheelers.
- India's 2030 EV targets: 30% cars, 70% commercial vehicles, 40% buses, 80% two/three-wheelers.
- India's SPR: 5.33 MT capacity; ~9.5 days of demand (Vishakhapatnam, Mangalore, Padur).
- India's transport sector: ~50% of total oil demand — the primary transmission channel for crude price shocks into consumer inflation.
- India importing crude from 40+ countries (March 2026): diversification strategy underway but Hormuz-routed share still dominant.