Market report

Posted On: February 24, 2026

Indian Automobile Sector Analysis |Feb 2026

Industry Overview

India’s automobile industry is a key driver of economic growth, contributing ~6% to GDP and ~15% of GST revenue. It supports 30 million jobs across the value chain, with ~4.2 million direct jobs. India is the world’s largest manufacturer of two-wheelers and three-wheelers, and the third-largest passenger car market. The sector is undergoing rapid transformation driven by EV adoption, GST reforms, and export growth.

Market Size and Growth Metrics

• Production (FY25): ~29 million vehicles across categories.
• -Domestic Sales (FY25): Passenger vehicles hit a record 4.3 million units, with SUVs contributing 65% of sales.
• Exports (FY25): Over 5.3 million vehicles shipped globally, reflecting double-digit growth.
• EV Market: 4.4 million EVs registered, ~6.6% penetration, supported by GST cuts and PLI schemes.
• Forecast: CAGR of 8–10% through FY27, led by EVs and exports.

Market Dynamics and Drivers

• Growth Drivers: EV adoption, GST reforms, rising exports, Make in India, scrappage policy.
• Supply Chain: Strong domestic manufacturing base, auto components contributing 2.3% of GDP.
• Technological Trends: EV batteries, hydrogen fuel, ethanol blending, connected vehicles.
• Consumer Trends: SUV dominance, rising demand for EVs and premium vehicles.

Competitive Landscape

• Passenger Vehicles: Dominated by Maruti Suzuki, Hyundai, Tata Motors, Mahindra.
• Two-Wheelers: Hero MotoCorp, Bajaj Auto, TVS, Honda lead.
• Commercial Vehicles: Tata Motors and Ashok Leyland dominate.
• EV Segment: Tata Motors, MG, and emerging startups gaining traction.
• Exports: India-made vehicles gaining global acceptance, especially in Africa and Latin America.

Regulatory Measures

• Ministry of Heavy Industries: PLI & PM E-DRIVE schemes supporting EV and battery manufacturing.
• SIAM (2026): Advocating circular economy, scrappage infrastructure, and multi-fuel pathways (ethanol, hydrogen, EVs).
• Economic Survey 2025–26: Highlights exports, EV initiatives, and GST reforms as growth drivers.

Macro Environmental Analysis

India’s automobile sector is experiencing rising global demand for exports, while supporting 30 million jobs domestically. Policy initiatives are driving a shift toward EVs, hydrogen, and ethanol blending, though the industry faces risks from the global slowdown, raw material costs, and semiconductor shortages.

SWOT Analysis – Indian Automobile Sector

Strengths

• Largest 2W and 3W manufacturer globally.
• Strong domestic demand and export growth.
• Policy support (PLI, GST cuts, EV incentives).
• Expanding EV ecosystem.

Weaknesses

• High reliance on imports for EV batteries.
• Rural demand volatility.
• Infrastructure gaps for EV charging.

Opportunities

• EV adoption and battery manufacturing.
• Circular economy and scrappage policy.
• Export expansion to new markets.
• Premium vehicle demand.

Threats

• Global recessionary pressures.
• Semiconductor supply chain risks.
• Competition from China and ASEAN.
• Climate-related compliance costs.

Future Outlook

• EV penetration projected to reach 15% by FY27.
• Passenger vehicle sales expected to cross 5 million units annually.
• Auto component exports projected to hit USD 30 billion by 2026.
• Circular economy and multi-fuel pathways to reshape industry.

Conclusion

India’s automobile sector is positioned for sustained growth, driven by EV adoption, exports, and policy support. While risks from global headwinds and supply chain constraints remain, the industry’s resilience, innovation, and government-backed initiatives make it a cornerstone of India’s manufacturing and economic transformation

Sources

• Ministry of Heavy Industries – 55th Annual Report 2024–25
  Provides official data on automobile production, EV initiatives, PLI scheme execution, and R&D roadmap for sustainable mobility.
• Press Information Bureau (PIB) – Make in India Auto Story (March 2025)
  Highlights GDP contribution (~6%), production growth (28 million vehicles in FY24), exports (4.5 million units), EV penetration (6.6%), and auto component sector contribution (2.3% of GDP).
• Economic Survey 2025–26
  Frames the automobile sector as a key driver of manufacturing growth, with emphasis on EV adoption, GST reforms, and export expansion.
• SIAM (Society of Indian Automobile Manufacturers) – Industry Statistics 2025Provides official production, sales, and export figures across passenger vehicles, two-wheelers, commercial vehicles, and EVs.

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