India’s automotive sector stands as one of the largest in the world, with an annual manufacturing capacity of 22.65 million vehicles in FY 2021. This includes passenger vehicles, commercial vehicles, three-wheelers, two-wheelers, and quadricycles, with exports accounting for 4.13 million units. Industry projections place the market’s value at US$300 billion by 2026, a steep rise from US$118 billion in 2020. The sector contributes 7.1 percent to India’s GDP and employs 37 million people, with the Automotive Mission Plan 2016–26 targeting a 12 percent GDP share and 65 million jobs.
Manufacturing is concentrated in four regional clusters. In the north, firms such as Maruti Suzuki, Honda SIEL, Tata Motors, Bajaj Auto, Hero Group, and Ashok Leyland dominate. The east hosts Tata Motors, Hindustan Motors, and Exide among others. Western India’s lineup includes Volkswagen, Renault Nissan, Mercedes Benz, Bharat Forge, and Skoda. The south features Hyundai, Toyota Kirloskar, BMW, Bosch, TVS Motor Company, and Daimler, alongside Ashok Leyland and Mahindra & Mahindra.
Domestic and foreign manufacturers compete intensely. Tata Motors launched the Ace Gold Petrol CX in July 2021, billed as India’s cheapest compact commercial four-wheeler at INR 3,99,000 (US$5,362). Hyundai’s alliance with shared mobility firm Revv, initiated in 2018, offers subscription-based access to its models in six cities.
Market segmentation shows two-wheelers dominating with 81.2 percent share, followed by passenger vehicles at 14.6 percent. In FY 2021, combined sales of these two segments exceeded 17.8 million units. Production capacity peaked at 30.92 million units in FY 2019 before pandemic-related disruptions reduced output. Sales followed a similar trajectory, peaking at 26.27 million units in FY 2019 before falling to 18.61 million in FY 2021. Recovery signs emerged in Q1 FY 2021–22 with a 113 percent growth in domestic sales.
In June 2021, Hero MotoCorp and Honda Motorcycle and Scooter India held 44.65 percent and 21.14 percent of the two-wheeler market, respectively. Bajaj Auto led the three-wheeler passenger category with 33.43 percent share. The luxury segment saw steep declines, with FY 2021 sales at 19,781 units compared to 60,637 in FY 2020. Mercedes Benz led with 7,087 units sold, followed by Jaguar, Volvo, and Audi.
Electric vehicles are positioned as a key driver of recovery. Government incentives, including a production-linked incentive (PLI) scheme, aim to boost EV and hydrogen fuel cell manufacturing. A study by CEEW Centre for Energy Finance estimates the EV market could reach US$206 billion by 2030, requiring US$180 billion in manufacturing and charging infrastructure investment.
India’s openness to foreign direct investment—100 percent under the automatic route—has attracted major players such as BMW, Hyundai, Kia Motors, Ford, and Honda. Between April 2000 and June 2021, the sector received US$30.52 billion in FDI, 5.58 percent of total inflows. In early FY 2021–22, it was the top FDI recipient with 27 percent share. The government’s National Infrastructure Pipeline and PM Gati Shakti Yojana, a US$1.33 trillion master plan for multi-modal connectivity, aim to strengthen industrial logistics.
The auto component industry, integral to OEM supply chains, grew at a 6 percent CAGR from FY 2016 to FY 2020, with domestic sales rising at 9.6 percent CAGR. FY 2022 was expected to see 18–20 percent growth, aided by the PLI and FAME II schemes. Upgrading from Bharat Stage IV to VI emission norms aligns India with global standards, reducing pollutant emissions. Engine components form the largest OEM supply segment at 26.1 percent share, followed by suspension and brakes, body and chassis, and drive transmission parts. Despite its scale, the industry remains fragmented, with limited foreign participation and low R&D capacity. Short-term challenges include commodity inflation and semiconductor shortages, though long-term growth drivers remain strong.
The Automotive Mission Plan’s “Vision 3/12/65” seeks to position India among the top three globally in engineering, manufacturing, and export, while increasing GDP contribution to over 12 percent and generating 65 million jobs.