India’s automotive industry, the third-largest globally, is undergoing a transformative phase, driven by technological innovation, shifting consumer preferences, and robust government policies. With a 12.5% YoY growth in FY24, the sector is poised to surpass US$ 300 billion by 2026, outpacing mature markets like Japan and Germany[3][5]. This article provides an in-depth analysis of the sector’s current dynamics, supported by case studies, granular statistics, and future projections.
Present Scenario of the Indian Automotive Sector
1. Market Growth and Economic Contribution
Scale and Expansion
India’s automotive industry experienced significant growth in FY24, with total vehicle production reaching 27.7 million units. Two-wheelers dominated the market, accounting for 77.8% of total production (17.97 million units), followed by passenger vehicles at 15.93% (4.4 million units).
Export Leadership
India continued to strengthen its position as a key vehicle exporter, with 4.5 million units exported in FY24. Two-wheelers led the segment with 3.45 million units shipped overseas. Tamil Nadu emerged as a leading automotive export hub, contributing 35% of India’s total automotive exports. The state hosts major OEMs (Original Equipment Manufacturers) such as Hyundai and Ford, further solidifying its role in global supply chains.
Foreign Direct Investment (FDI) Inflows
From 2000 to 2024, India’s automotive sector attracted a cumulative US$ 36.268 billion in FDI. Recent investments include:
- Hyundai’s US$ 3.85 billion EV expansion initiative, reinforcing India’s push for electric mobility.
- VinFast’s US$ 2 billion project in Tamil Nadu, strengthening the state’s role in the global EV market.
GDP Contribution and Employment
The automotive sector plays a vital role in India’s economy, contributing 7.1% to the nation’s GDP, a significant rise from 2.77% in 1992–93. Key manufacturing hubs such as Maharashtra and Gujarat account for 40% of the country’s total automotive production. The industry supports 19 million jobs, both directly and indirectly, making it a crucial driver of employment and economic development.
2. Changing Consumer Trends
SUV Dominance in India
In FY24, SUVs accounted for a remarkable 42% of passenger vehicle sales, underscoring their growing popularity among Indian consumers. The segment saw strong performances from key models, with Maruti Suzuki’s Grand Vitara recording an average monthly sales figure of 8,200 units, while Hyundai Creta continued its dominance, leading the market with 13,000 units per month.
read The SUV Boom in India: Why SUVs Rule the Roads in 2025
Case Study: Mahindra XUV700’s Success
Mahindra’s XUV700, launched in 2023, witnessed an overwhelming response, securing 50,000 bookings within just three days. This success was primarily driven by its cutting-edge features, including Advanced Driver Assistance Systems (ADAS), a panoramic sunroof, and a robust safety package, making it a preferred choice in the mid-size SUV segment.
Rise of EV and CNG Vehicles
Electric Vehicles (EVs) Gaining Traction
The electric vehicle market witnessed a 30% year-on-year (YoY) growth in 2024, led predominantly by two-wheelers, which recorded a 37% growth. In the four-wheeler EV segment, Ola Electric emerged as a dominant player, selling 328,000 units in FY24 and securing a 32% market share. Meanwhile, Tata Motors’ Nexon EV continued to lead the electric car market, contributing 68% of total electric car sales in India.
CNG Vehicles: Cost-Efficient Alternative
The demand for CNG-powered vehicles remained strong, particularly in response to rising fuel costs. Maruti Suzuki, a pioneer in this segment, saw its CNG vehicle portfolio (including models like the WagonR and Swift) contribute 23% of its total sales in FY24. The key driver behind this shift was the 40% cost savings in fuel expenses compared to petrol, making CNG a compelling alternative for budget-conscious buyers.
Premiumization in the Indian Auto Market
The Indian luxury car segment witnessed a significant upswing, with 42,731 luxury cars sold in 2023. Mercedes-Benz maintained its leadership in the segment, selling 1,308 units in September 2024. Meanwhile, BMW’s X1 emerged as India’s top-selling luxury SUV, with 1,011 units sold, highlighting the increasing preference for premium and feature-rich vehicles among Indian consumers.
3. Government Initiatives Driving Growth
Production-Linked Incentive (PLI) Scheme for EVs and Auto Components
The Rs. 25,938 crore (approximately $3.1 billion) PLI scheme aimed at boosting domestic manufacturing in the automobile and auto component industry has successfully attracted Rs. 67,690 crore (approximately $8.1 billion) in investments from various companies. This initiative is part of the Indian government’s strategy to promote self-reliance (Atmanirbhar Bharat) and enhance the competitiveness of domestic manufacturers.
One of the significant investments under this scheme comes from Tata Motors, which has pledged Rs. 9,000 crore (around $1.08 billion) to establish an electric vehicle (EV) manufacturing plant in Tamil Nadu. This facility is expected to create 5,000 direct jobs, alongside several indirect employment opportunities in the state’s growing EV ecosystem.
read PLI Scheme for India’s Automotive Sector: Boosting Manufacturing, Innovation, and Green Mobility
FAME-II and PM E-DRIVE Schemes
India’s transition towards sustainable mobility is being accelerated by government initiatives such as FAME-II (Faster Adoption and Manufacturing of Electric Vehicles) and PM E-DRIVE (Prime Minister’s Electric Mobility Drive).
- FAME-II (Faster Adoption and Manufacturing of Electric Vehicles – Phase II)
- This program has subsidized the purchase of 1.34 million electric vehicles (EVs) across India.
- The total subsidies provided under FAME-II amount to $696.8 million.
- The objective is to make EVs more affordable for consumers while promoting local manufacturing.
- PM E-DRIVE Scheme
- The Indian government has allocated $1.3 billion under this initiative.
- A key focus of the scheme is the expansion of EV charging infrastructure, with plans to install 7,432 fast-charging stations by 2026.
- This initiative aims to alleviate range anxiety among EV users and support the rapid adoption of electric mobility.
read FAME in India: Revolutionizing the Auto Industry
Bharat NCAP and Safety Innovations
The Bharat New Car Assessment Program (Bharat NCAP) was introduced as a safety rating system for vehicles, enhancing road safety and consumer confidence in Indian-made cars.
- Following the Bharat NCAP implementation, models like the Tata Nexon and Mahindra XUV700 received 5-star safety ratings, reinforcing the emphasis on safer automobiles.
- Tata Motors has been actively investing in safety innovations, as reflected in the 158 patents it filed in FY23. These patents cover advancements in crash safety, structural integrity, and smart vehicle technologies.
4. Electric Vehicle (EV) Momentum
Market Size and Growth of India’s EV Industry
India’s electric vehicle (EV) sector has been growing at an unprecedented pace, driven by increasing demand, government incentives, and advancements in battery technology.
EV Sales in FY24
- In the fiscal year 2023-24 (FY24), India sold 1.67 million EVs, marking a significant increase from previous years.
- Two-wheelers and three-wheelers dominate the market, with models like:
- Ola S1 Pro leading the two-wheeler segment.
- Bajaj RE emerging as a top performer in the three-wheeler category.
Projected Growth (2024-2026)
- The EV market is projected to grow at a CAGR of 36% until 2026, driven by factors such as:
- Lower ownership costs compared to internal combustion engine (ICE) vehicles.
- Increasing investment in local manufacturing and battery technology.
- Rising consumer awareness and favorable government policies.
- Battery production, a critical component of EV growth, is expected to expand at a 30% CAGR over the same period, ensuring a stable supply chain for the industry.
Case Study: Ola Electric’s Gigafactory
- Ola Electric is playing a crucial role in India’s EV revolution with its Gigafactory in Krishnagiri, Tamil Nadu.
- The plant aims to produce 10 million EV batteries annually by 2026.
- This initiative is expected to reduce India’s reliance on Chinese imports, strengthening the country’s EV supply chain and making vehicles more cost-competitive.
Challenges Facing the EV Industry
Despite rapid growth, India’s EV market faces significant hurdles, including infrastructure limitations and supply chain constraints.
1. Infrastructure Gaps
- India currently has only 7,000 public charging stations, which is far below the required 2.5 million to support mass EV adoption by 2030.
- Tata Power’s collaboration with HPCL aims to install 1,000 new charging stations by 2025, addressing part of this shortfall.
- Expanding charging networks in rural and semi-urban areas remains a key challenge, as most existing stations are concentrated in metro cities.
2. Supply Chain and Battery Costs
- Lithium prices surged by 500% since 2020, significantly increasing battery production costs.
- India currently imports most of its lithium-ion cells, making the localization of battery production crucial.
- To tackle this, Tata Group is investing Rs. 13,000 crore ($1.56 billion) in a Gujarat-based battery manufacturing plant.
- This facility will enhance domestic lithium-ion battery production.
- It will reduce dependency on imports and stabilize EV battery costs over time.
read India’s Electric Vehicle Revolution: Growth, Challenges, and Future Prospects
5. Global Competition
The entry of foreign manufacturers has reshaped the Indian auto landscape. Here are the key areas where global competition is evident:
1. Technology and Innovation
Global players bring cutting-edge technology, including hybrid and electric vehicles, connected car features, and advanced safety mechanisms. Indian manufacturers are responding by investing in R&D and collaborating with tech firms to enhance their offerings.
2. Electric Vehicle Revolution
The EV market in India is gaining momentum, driven by government subsidies and environmental concerns. Companies like Tata Motors, Ola Electric, and Ather Energy are leading the EV push, while global brands such as Tesla and Hyundai are expanding their electric portfolios in India.
3. Manufacturing and Supply Chain Optimization
India has emerged as a global manufacturing hub, attracting companies to set up production units. Competitive labor costs and policy support have encouraged global firms to localize manufacturing, reducing costs and enhancing efficiency.
4. Pricing and Affordability
Indian consumers are price-sensitive, and affordability plays a crucial role in purchasing decisions. While global brands focus on premium segments, domestic manufacturers cater to budget-conscious buyers. However, brands like Renault and Kia have successfully introduced competitively priced models.
5. Sustainability and Green Mobility
With stricter emission norms and sustainability trends, Indian manufacturers are adopting eco-friendly practices. The shift towards hybrid and electric mobility is accelerating, with both global and domestic firms investing in green technologies.
Challenges and Opportunities
Challenges:
- High import dependency for EV components
- Infrastructure gaps (EV charging stations, road conditions)
- Regulatory compliance and policy shifts
- Intense price competition affecting margins
Opportunities:
- Expanding rural market potential
- Government incentives for local manufacturing
- Increasing adoption of smart and connected vehicles
- Rising disposable incomes leading to premium segment growth
Key Trends Shaping 2024
1. SUV Revolution
India’s SUV market is booming, with SUVs like the Hyundai Creta and Kia Seltos dominating 50% of new vehicle launches. Mahindra’s Thar 4×4 has gained massive traction, securing 25,000 bookings per month, thanks to its off-road appeal.
A notable innovation is the Tata Curvv EV, India’s first SUV coupé, designed for urban millennials. It boasts a 500 km range and Level 2 autonomous driving, setting new benchmarks in the EV segment.
2. Safety as a Priority
Post-Bharat NCAP, 6 airbags and ESC became standard in 60% of new models. Maruti Suzuki’s Brezza achieved a 4-star rating, boosting sales by 18% MoM.
3. Hybrid and Flex-Fuel Technologies
Toyota’s ethanol-powered Innova (BS-VI Stage II compliant) reduces CO2 emissions by 40%. The government targets 20% ethanol blending by 2025, saving Rs. 30,000 crore annually in oil imports.
4. Digital Transformation
Fintech partnerships are transforming auto financing in India. Tata Motors, in collaboration with Bajaj Finance, now offers 90% on-road funding, slashing loan approval time to just 30 minutes. Meanwhile, Renault’s Flexi Pay Scheme boosted sales by 22% in Q1 2024, making car ownership more accessible.
In the connected car space, MG Hector’s i-SMART technology is revolutionizing driving with over-the-air updates and AI-driven navigation services, attracting 50,000+ subscribers.
Future Outlook: Roadmap to 2030
1. Electric Vehicle Expansion
India’s electric two-wheeler (E2W) market is set to double to 2.5 million units by 2025, driven by popular models like Ola S1 Air (₹1.10 lakh) and Ather 450X.
In the electric three-wheeler (E3W) segment, Bajaj Auto leads with a 35% market share, targeting 500,000 units annually by 2025, supported by FAME-II subsidies.
On the infrastructure front, the Battery Waste Management Rules (2022) require 70% recycling efficiency, with Tata Motors partnering with the Solar Association to power EV chargers using renewable energy.
2. Policy-Driven Growth
India’s PLI scheme extension until 2028 is set to drive investments in hydrogen fuel cells and autonomous technology. Ashok Leyland plans a $500 million investment to develop hydrogen-powered trucks, accelerating the green mobility shift.
On the global front, Suzuki’s Gujarat plant exports 250,000 units annually to Africa, while Nissan’s Chennai hub aims to export 100,000 small cars to ASEAN markets, strengthening India’s role as an automotive export hub.
3. Technological Advancements
India is making strides in autonomous driving with Mahindra’s ₹400 crore (US$ 48.1 million) IJF partnership, focusing on Level 4 autonomy. Road trials are set to begin in Bengaluru by 2026, marking a major step in self-driving technology.
In hydrogen mobility, Hyundai’s Hydrogen Valley Hub in Tamil Nadu plans to deploy 50 fuel cell trucks by 2025, targeting a 30% reduction in logistics emissions, reinforcing India’s green energy transition.
4. Sustainable Manufacturing
India is advancing its circular economy with Maruti Suzuki’s Chandigarh scrappage facility, recycling 10,000 vehicles annually and recovering 95% of materials, promoting sustainable vehicle disposal.
In ethanol blending, flex-fuel engines support India’s net-zero target by 2070. TVS Motor’s ethanol-compatible Apache cuts emissions by 25%, highlighting the shift toward cleaner transportation.
Conclusion
India’s automotive sector is transitioning from a volume-driven market to a value-centric, sustainable ecosystem. . Challenges like charging infrastructure and raw material costs persist, but innovations in autonomy, hydrogen, and circular manufacturing position India as a global mobility leader. The Bharat Mobility Expo 2025, showcasing 50+ green models, will further cement this trajectory.