Policy tailwinds and demand drivers powering India’s automotive future

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India’s automotive sector is not just growing — it is being deliberately shaped by a series of government policies, demand-side shifts, and technology advancements that position the country as a future leader in global mobility. For global manufacturers and investors, this alignment of market opportunity and policy support signals that the time to act is now.

Government initiatives shaping the industry

India’s government has implemented a series of policy measures to strengthen domestic manufacturing and enhance competitiveness in the global value chain:

• Make in India – This flagship initiative revitalizes domestic manufacturing, cuts import dependency, and attracts foreign direct investment into key sectors, including automotive.
• Aatmnirbhar Bharat (Self-Reliant India) – Aims to localize production of critical components such as engines, gear systems, and EV batteries, while integrating start-ups and SMEs into global supply networks.
• FAME India Scheme – Offers incentives to promote electric and hybrid vehicle adoption, supporting technology development, demand creation, pilot projects, and charging infrastructure.
• Production Linked Incentives (PLI) – Encourages investment in advanced automotive technologies, mandating 25% domestic value addition (scaling to 60% over five years) to boost local capabilities and reduce imports.
• PM E-Drive Scheme – Provides funding to scale production and adoption of e-trucks, e-buses, e-ambulances, and other electric vehicles. It also earmarks US$ 250 million to expand EV charging infrastructure nationwide.

Together, these policies provide both fiscal incentives and strategic clarity for global investors considering India as a long-term manufacturing base.

Demand drivers creating a robust growth cycle

India’s rising middle class — approximately 450 million people — is fueling sustained demand for two-wheelers, passenger cars, and premium vehicles. Urbanization, improved access to financing, and rising disposable incomes are accelerating vehicle ownership, particularly in semi-urban markets. This growing consumer base, combined with rapid e-commerce expansion, is also driving demand for commercial vehicles and logistics fleets.

Global supply chain diversification

Geopolitical uncertainties, from U.S.–China trade tensions to conflicts in Europe and the Middle East, are prompting global automakers to diversify supply chains. India’s skilled workforce, cost-competitive manufacturing, and policy stability position it as a leading alternative for companies adopting a “China Plus One” strategy to reduce risk and increase resilience.

Technology and EV innovation

India is rapidly advancing its capabilities in electric mobility. By 2030, EV adoption is projected to reach 30% of private cars, 70% of commercial vehicles, and nearly 100% of two- and three-wheelers. This shift creates opportunities across the EV value chain — from battery and motor production to charging infrastructure and software integration — offering significant opportunities for early movers.

Why this matters for global manufacturers

India’s combination of policy support, domestic demand, and global supply chain realignment makes it a compelling destination for new investment. Companies that enter now can capture first-mover advantages, secure market share, and position themselves as partners in India’s journey toward becoming a global innovation and export powerhouse.

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Authored by

Written by Anuj Kumar, Senior Consultant based in the India office.