NITI Aayog has recently unveiled a comprehensive report titled “Automotive Industry: Powering India’s Participation in Global Value Chains”, offering a detailed analysis of the country’s automotive sector. The report, launched in the presence of Shri Suman Bery (Vice Chairman), Dr. V.K. Saraswat, Dr. Arvind Virmani (Members), and Shri BVR Subrahmanyam (CEO), outlines the current status, challenges, and strategic roadmap to elevate India’s participation in the global automotive ecosystem.

India’s Current Position in the Global and Domestic Automotive Landscape

• As of 2023, the global automobile production stood at approximately 94 million units. The automotive components market globally was valued at a massive USD 2 trillion, with about USD 700 billion comprising exports. Within this landscape, India has emerged as the fourth-largest automobile producer globally—trailing only China, the USA, and Japan—with a domestic production nearing 6 million vehicles annually.
• India’s automotive sector holds a notable presence in both domestic and export markets. Its comparative advantage lies particularly in the small car and utility vehicle segments. Supported by government-led initiatives such as 'Make in India' and bolstered by a cost-competitive workforce, India has positioned itself as a strong candidate for becoming a global hub for automotive manufacturing and exports.

Transformational Trends in the Global Automotive Industry

• The global automotive industry is undergoing a significant transformation, largely driven by the transition toward electric vehicles (EVs). This shift is catalyzed by a combination of consumer demand for sustainable transportation, increasing environmental regulations, and rapid advancements in battery technology. The global acceleration in EV adoption is reshaping traditional supply chains and prompting new areas of investment, such as lithium and cobalt mining, critical to battery production.
• Parallel to the EV revolution, the rise of Industry 4.0 is redefining manufacturing processes within the sector. Technologies including Artificial Intelligence (AI), Machine Learning (ML), the Internet of Things (IoT), and robotics are being integrated to optimize productivity, reduce operational costs, and enhance flexibility. These digital innovations are laying the foundation for smart factories and connected vehicles, thereby redefining the scope of automotive manufacturing itself.

Key Challenges Hindering India’s Global Competitiveness

Despite its position as a leading vehicle producer, India holds only a modest 3% share in the global automotive components trade, valued around USD 20 billion. This is a significant gap compared to global trade leaders in high-precision segments such as engine components, drive transmission, and steering systems—areas where India’s contribution is limited to just 2-4%.

Multiple challenges restrict the sector’s potential for deeper integration into the Global Value Chain (GVC). These include:

• High operational costs
• Infrastructural limitations
• Low levels of research and development (R&D) investment
• Moderate global integration
• Insufficient focus on advanced manufacturing capabilities

Strategic Roadmap and Proposed Interventions

To address these issues, the NITI Aayog report recommends a series of fiscal and non-fiscal interventions designed to enhance India’s global competitiveness in automotive manufacturing. These strategies are structured across four categories of automotive components based on their complexity and level of maturity—Emerging & Complex, Conventional & Complex, Conventional & Simple, and Emerging & Simple.

Fiscal Interventions

These include:

• Operational Expenditure (Opex) Support: Aimed at expanding manufacturing capacities, with particular emphasis on capital expenditure (Capex) for tooling, dies, and supporting infrastructure.

• Skill Development: Implementation of dedicated programmes to create a skilled workforce, ensuring sustainability and competitiveness.

• R&D and Branding Support: Encouraging research and innovation through government incentives, along with facilitating Intellectual Property (IP) transfers to empower Micro, Small and Medium Enterprises (MSMEs). Branding support for international markets is also emphasized to enhance product differentiation.

• Cluster Development: Promoting cooperation among firms by setting up common facilities such as R&D centers, testing labs, and supply chain support units.

Non-Fiscal Interventions

Key non-monetary strategies suggested in the report include:

• Promotion of Industry 4.0 Technologies: Encouraging the adoption of smart manufacturing practices that enhance efficiency, reduce costs, and support sustainability goals.
• International Collaboration: Fostering joint ventures, facilitating foreign direct investments, and leveraging Free Trade Agreements (FTAs) to access new global markets.
• Regulatory Reforms and Ease of Doing Business: Streamlining policy regulations to enhance manufacturing ease, enabling more flexible labor policies, improving supplier linkages, and ensuring smoother operational processes for automotive firms.

Vision for 2030: Driving Toward Global Leadership

NITI Aayog’s vision for the Indian automotive sector by 2030 is both ambitious and achievable, contingent upon the successful implementation of the proposed interventions. The goals outlined in the report include:

• Automotive Component Production: Increasing production to USD 145 billion by 2030.
• Export Growth: Expanding exports from USD 20 billion to USD 60 billion.
• Trade Surplus: Generating a net trade surplus of approximately USD 25 billion.
• Global Value Chain Share: Enhancing India’s participation from 3% to 8% in the global automotive component trade.
• Employment Generation: Creating 2 to 2.5 million new job opportunities, raising the total direct employment in the sector to between 3 and 4 million.

Conclusion: Shifting Gears for a Global Role

India’s automotive sector holds immense promise, but tapping into this potential requires a coordinated effort from the central and state governments, industry leaders, and policy institutions. While the country has made significant strides in manufacturing and export capabilities, a more robust integration into the global value chain is necessary to solidify its status as a global automotive hub.

The combination of technological transformation, strategic policy support, and a skilled workforce can enable India to redefine its position on the global automotive map. As the industry evolves from traditional factory floors to smart, interconnected production systems, India must gear up to lead this change and claim its rightful place among global leaders in the automotive domain.