Automotive Industry in India Defies Global Disruptions (2025)

BLOG Oct 08, 2024

Despite infrastructure and manufacturing challenges that couldtemper the pace of electric vehicle (EV) adoption, India's largedomestic automotive market, low existing EV penetration rates, andincreasing production capacity make it an attractive destinationfor automakers and suppliers.

If Tata Motors' and Mahindra's success in navigating thepandemic and semiconductor shortages is any indication, India isexpected to become a major player in global light vehicleproduction. Furthermore, with global supply chain disruptions andthe return of protectionism, India's position as an export base formature markets is becoming increasingly viable.

Potential of India Automotive Industry to Bridge Gaps in GlobalSupply Chain

Source: S&P Global Mobility LightVehicle Production Forecast

The Resilience of India Automotive Industry

While major markets like mainland China, the United States, andGermany grappled with production setbacks during disruptions causedby COVID-19 and semiconductor shortages, automotive industry inIndia showed resilience. Indian automotive OEMs demonstrated astronger capability to secure semiconductor supplies despite havinglower purchasing power compared to global car manufacturers andoffering fewer features in their vehicles.

India's high GDP growth rate, which is further projected toremain over 6% between 2026 and 2031, significantly higher than theglobal average of 2.7%. India's domestic automotive market is asignificant draw for global automakers. As the 3rd largest marketin light vehicle sales and the 4th largest in light vehicleproduction, India's low car penetration rate of just 38 vehiclesper 1,000 people presents a massive opportunity for the automotiveindustry of India. According to ,production capacity is expected to rise from 6.8 million units in2023 to 10 million by 2031, further solidifying India's role in theglobal automotive landscape.

Concurrently, the US and EU's increased tariffs on Chinese EVshave created a void that India is well-positioned to fill. With itsstable supply chain, light vehicle production growth in India isexpected to maintain a steady pace. S&P Global Mobilityprojects a growth rate of 4 percent for 2024, with longer-termexpectations of growth stabilizing between 4% and 6% annuallythrough 2031.

A significant driver of this growth is the anticipated increasein exports from major manufacturers like Maruti Suzuki and Hyundai,which may benefit from the growing demand for affordable vehiclesin emerging markets.

Suzuki, for example, aims to ramp up production to 4 millionunits by 2031, with a focus on hybrids and EVs.

India Light Vehicle Production, xEV vs. ICE

Data compiled: 8th July 2024.
Source: S&P Global Mobility.
XEVs = Mild Hybrid electric vehicle (MHEV)+ Hybridelectric vehicle(HEV)+Plug in Hybrid vehicle (PHEV)+Range extenderelectric vehicle (REX)+Battery Electric Vehicle (BEV)

Transition of India Automotive Industry to CleanTechnologies

India's automotive landscape is also shifting towards EVs. Theshare of internal combustion engine (ICE) vehicles produced inIndia is projected to decrease dramatically, from 97% in 2019 toaround 35% by 2035. The implementation of stricter emissionstandards like the Bharat Stage 6 (BS6) and upcoming BS 7 normshave pushed manufacturers to innovate and transition towardscleaner technologies.

India automotive market is also witnessing a corresponding risein the adoption of low emission vehicles like xEVs. Demand forhybrid electric vehicles (HEVs) and battery electric vehicles(BEVs) is expected to grow substantially, with a notable increasein hybrid, range extender vehicles and plug-in hybrid vehicles inthe short term.

However, the current state of infrastructure, particularly theavailability of charging stations and the overall EV ecosystem inIndia automotive industry, could temper the pace of EV adoption.Consumers and automakers are still somewhat cautious in the currentEV landscape. There is a noted delay in adopting new models andplatforms due to uncertainty surrounding regulatory conditions,like the aforementioned BS7 emission norms.

High costs associated with early-stage EV manufacturing havealso led to rising vehicle prices, raising concerns aboutaffordability among first-time buyers. The increase in discountsfor ICE vehicles amid consumer trepidation and high inventorylevels could further slow the rate of adoption in the immediatefuture.

Even with these mid-term pressures, the trend is unmistakable.Vehicle manufacturers in India are increasingly adoptingmulti-energy platforms that can support both internal combustionengine (ICE) vehicles and EVs. Over the next few years, theseplatforms are expected to increase in the market, setting the stagefor the eventual rise of dedicated EV platforms. Overall, thelong-term outlook for EVs in India is positive. As infrastructureimproves and consumer concerns are addressed, EV adoption is likelyto accelerate, according to S&P Global Mobility forecasts.

As India automotive industry is in the midst of a technologicalrevolution, there is also a heightened emphasis on supply chainmanagement. Innovations like ADAS (Advanced Driver AssistanceSystems), software-defined vehicles, and AI (ArtificialIntelligence) are becoming standard features, which require OEMs tointegrate these components into their supply chain.

This article is part of a series featuring highlights fromS&P Global Mobility's 2024 Solutions Webinar Series. Thewebinar, India's Light Vehicle Production Outlook and Tata Motors'Supply Chain Resiliance, occurred on July 16, 2024.

Watch the recording

This article was published by S&P Global Mobility and not by S&P Global Ratings, which is a separately managed division of S&P Global.