As per our research report, the Global Biofuel Vehicle Market size is estimated to be growing at a CAGR of 6.79% from 2023 to 2030.
Biofuel is made of organic materials such as plants and biomass. It is an alternative t conventional fossil fuels such as coal, oil, and natural gas. It is widely used in the transportation sector due to the growing demand for sustainable energy sources. It is mainly of three types -Ethanol, which is used as a blending agent with gasoline to power vehicles, Biodiesel is used in diesel engines in vehicles as they release low greenhouse gas emissions, and Biogas which is generated from animal and food waste is widely used as an alternative to natural gas in vehicles.
Biofuels are witnessing an increase in market demand as they are considered a reliable and sustainable source of energy for transportation that helps to reduce carbon dioxide emissions. Moreover, unlike other fuels, biofuel offers price stability as it is produced using agriculture and feedstock sources, making them less affected by price fluctuations in the oil market.
The pandemic had affected the biofuel vehicle market. Due to disrupted supply chains, there was a halt in the production process, which created a shortage of biofuels in the market. Further, the decline in oil prices has shifted consumer demand toward conventional fossil fuels. In addition, the global lockdown limited the use of private cars and other vehicles, which declined the market growth of biofuels for vehicles.
Furthermore, restrictions on movement during the pandemic led to a reduction in the demand for transport fuel. Also, the pandemic reduced the consumption of biofuel in countries where a certain amount of biofuel was required to be blended with transport fuels such as gasoline and diesel. As per International Energy Agency, global gasoline and diesel demand contracted by 10% and 6% respectively in the year 2020.
Post-pandemic, there is an increase in research and development by governments and institutes to find a sustainable source of energy for the transportation industry. This includes the use of other sources to produce biofuel from non-food crop feedstocks such as cellulosic ethanol and biomass-based Fischer-Tropsch (bio-FT) technologies that can help to produce low-carbon biofuels for vehicles. To reduce greenhouse gases, there has been an increase in the production of biofuels from algae and agricultural residues.
Furthermore, government support for biofuels in the form of schemes, programs, subsidies, and others has contributed to the growth of the biofuel vehicles market post-pandemic. For instance, in August 2022, the US government incentivized biodiesel, sustainable aviation fuel, and advanced fuels for production.
Apart from this, the usage of advanced techniques for the production of biofuels such as synthetic biology and genetic engineering that modify micro-organisms to produce biofuel and carbon capture and utilization technique helps to capture carbon dioxide emissions generated during biofuel production and hence helps to reduce carbon footprint. All this has resulted in the growth of biofuels in the market to pre-pandemic levels.
The restraints to this market include the high cost of manufacturing and processing that can hamper the market demand for biofuels. This includes the high cost of feedstocks, processing equipment, and advanced technological machines.
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