India’s Automotive Industry: Driving the Future of Mobility

India’s automotive industry is shifting gears in a way that could redefine mobility for decades to come.

From being focused on two-wheelers and compact cars, the sector is now moving toward global leadership with stricter emission rules and a growing shift to electric vehicles.

The auto sector today is one of the strongest engines of growth for India’s economy.

It contributes nearly 7% to the country’s GDP and close to 40% of manufacturing GDP.

It generates 30 million jobs, directly and indirectly, while also bringing in almost 15% of all GST collections.

On the global stage, India now stands as the fourth-largest vehicle producer, holding a strong edge in scale.

It is also the world’s largest producer of two-wheelers, the second-largest producer of buses, and the third-largest producer of medium and heavy commercial vehicles.

Passenger vehicle capacity is set to expand by another 4 million units by 2032, backed not only by strong domestic demand but also by booming exports.

In FY25, auto production crossed 31 million units, with exports surging 19% to over 5.3 million.

Yet, the true growth story is still ahead.

Vehicle penetration in India remains among the lowest in the world.

Only 26 people out of every 1,000 own a car, compared to 183 in China and nearly 600 in the United States.

Even two-wheeler penetration lags behind other Asian countries.

With incomes rising and the 20-49 age group expected to form almost half the population by 2031, the market is poised to explode in the coming decade.

By 2029, per capita GDP is projected to cross $4,200, adding further fuel to aspirational purchases.

The government has played an important role in steering this shift, especially in electric mobility.

Flagship policies such as FAME, the PM E-Drive initiative, and production-linked incentives have already mobilised more than ₹66,000 crore to push EV adoption and localisation.

By 2030, India aims to scale auto production to $145 billion, boost exports to $60 billion, create over two million new jobs, and increase its share of the global auto component market from 3% to 8%.

Progress is already being made, as in FY25 alone, more than 20 lakh electric vehicles were sold.

Electric three-wheelers accounted for 57% (6,99,073 units) of all three-wheeler sales, with Mahindra Last Mile Mobility emerging as the leader in this segment with 10% share. Automakers are racing to secure their positions in the new landscape.

Tata Motors filed 250 patents and 148 design applications in FY25, its highest ever, while Mahindra & Mahindra announced investments worth ₹26,000 crore by 2027, half of which will go into EVs.

Hero MotoCorp entered the electric three-wheeler market with a ₹525 crore investment in Euler Motors, while TVS Motor committed ₹2,000 crore to expand operations in Karnataka.

The passenger vehicle market continues to be dominated by familiar names, with Maruti Suzuki holding nearly 40% share, followed by Mahindra, Hyundai, Tata Motors, and Toyota.

At the same time, competition is intensifying as global players like Kia, MG, Skoda, Honda, and Volkswagen fight for their share of the market.

In terms of performance, Tata Nexon led the list of top-selling car models in September 2025 with 22,573 units, followed by Maruti Suzuki Dzire at 20,038 units and Hyundai Creta at 18,861 units.

Among two-wheelers, Hero MotoCorp topped the charts with 6,87,220 units, followed by Honda with 5,68,164 units and TVS Motor Company with 5,23,923 units.

Tax and trade reforms are also shaping the industry.

The rollout of GST 2.0 brought relief by cutting rates on small cars, two-wheelers, and three-wheelers from around 30% to 18%, while keeping EVs at just 5%.

Luxury cars, however, remain taxed at 40%.

Also, according to ICRA, the tariff tweaks are expected to impact around 8% of auto-component output.

Consumers are already seeing the benefits, with price cuts of up to ₹1.5 lakh on popular models.

On the export side, the U.S. continues to be a critical market, accounting for 27% of India’s auto component exports and nearly a third of the sector’s revenue.

But this dependence also leaves the industry exposed to tariff shifts and trade tensions.

India’s automotive story has always been about scale, but the next chapter is about transformation.

The next decade will decide whether India simply fuels its domestic demand or takes the wheel as a global leader in sustainable mobility.

Sources:

PIB
PIB
Economic Times
Forbes
IBEF
Business Standard
Kotak Mutual Fund
IBEF
Autocar Professional
Tata Motors
Businessline
Economic Times
CNBC TV18
Economic Times
Hindustan Times
Autocar India
Times of India
Livemint
India Times
Business Standard