What drives India's evolving automotive supply chain?

As India's automotive sector advances towards sustainability, rising EV adoption, robust policies, and tech-driven supply chains fuel its global leadership ambitions.

- Rajarshi Chatterjee

The Indian automobile industry is vital to the nation's economy, contributing around 7.1% to the GDP and employing nearly 19 million people. Two-wheelers predominantly dominate the sector and benefit from a growing middle class, a predominantly young population, and expanding opportunities in rural markets. The growth of logistics and passenger transportation fuels demand for commercial vehicles. Looking ahead, the industry increasingly emphasizes vehicle electrification, particularly for three-wheelers and small passenger vehicles, which presents opportunities for innovation and sustainable growth.

India: A growing auto market and a rising exporter

Earlier this year, the Minister of Road Transport and Highways of India Nitin Gadkari announced that India has become the world's third-largest automobile market, surpassing Japan. The electric vehicle (EV) sector has experienced a remarkable 500% increase in sales from 2021 to 2023, with over 1.3 million EVs sold in the financial year 2024. This market is anticipated to grow at an annual rate of 50%, potentially reaching $7.09 billion by 2025. By 2030, India could represent a $206 billion opportunity in EVs, supported by $180 billion in investments.

Additionally, the India Brand Equity Foundation reports the passenger car market, valued at $32.7 billion in 2021, is also projected to grow at a CAGR of 9%, reaching about $54.84 billion by 2027, supported by government initiatives like the Automotive Mission Plan 2026 and the scrappage policy.

However, India also excels in heavy vehicle manufacturing, being the largest producer of tractors, the second-largest manufacturer of buses, and the third-largest producer of heavy trucks globally. In the financial year 2023, the country produced 25.9 million vehicles and exported 4.76 million vehicles.