India’s Automotive Industry Gears Up To Power $5 Trillion Economy

India’s automobile industry is playing a central role in the country’s journey toward a $5 trillion economy. With vast production capacity and global reach, the sector is deeply linked to manufacturing, exports, and job creation.

In FY 2024–25, India ranked third globally in vehicle sales and fourth in production. It manufactured over 31 million vehicles, including 5 million passenger cars and nearly 24 million two-wheelers.

Export performance remained strong, with 5.7 million units shipped to global markets like Mexico, Japan, and Africa.

The industry contributes 7.1% to India’s GDP and 49% to manufacturing GDP. It also provides employment to over 37 million people and accounts for nearly 8% of India’s exports.

Policies driving growth & innovation

The government is driving sector growth with targeted schemes and incentives.

The Production Linked Incentive (PLI) Scheme for automobiles has an outlay of Rs 25,938 crore. It supports the manufacturing of EVs, hydrogen, autonomous, and software-defined vehicles.

By 2025, the scheme attracted Rs 67,000 crore in proposals but disbursed only US$1.7 billion.

FAME-II, worth Rs 11,500 crore, supports EV purchases and adoption across segments.

Over 1.3 million EVs have benefited from this scheme so far.

A separate PLI for advanced battery storage (ACC) supports domestic battery production worth Rs 18,100 crore. This reduces reliance on imported lithium batteries. The Vehicle Scrappage Policy helps remove polluting vehicles, boosting demand for new, clean vehicles.

Challenges & the road ahead

In FY 2024–25, EVs crossed 6% of total vehicle sales, led by Tata, MG, and Mahindra.

In May 2025, electric cars reached over 4% of monthly sales.

Despite gains, India still depends on imports for rare-earth magnets, lithium, and semiconductors.

Disruptions from China hit Maruti Suzuki’s e-Vitara production in April 2025.

Charging infrastructure remains limited, especially on highways and in rural areas.

ICE vehicles remain dominant with a 92% share, mainly due to low costs and fuel availability.

CNG vehicle registrations crossed 1.2 million, with Gujarat leading in CNG over petrol sales.

India’s auto components sector grew to US$74 billion, with exports reaching US$21.2 billion.

Global players like VinFast and Suzuki are expanding in India.

VinFast is building an Rs 16,000 crore EV plant in Tamil Nadu.

The road ahead involves building domestic supply chains and expanding green infrastructure.

With strong policy support and global investment, India’s auto sector is set to become a global growth engine.

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