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Informist, Tuesday, Jan. 6, 2026

 

NEW DELHI - India’s automotive sector needs improvement in quality and technology in order to enhance export competitiveness, according to a NITI Aayog report. India also needs strategic measures such as lower tariffs and reorientation of production toward high-demand segments to increase automotive exports, the report said. 

 

"The deliberations highlight that India's automotive sector stands at a critical juncture: while production capabilities and domestic demand remain strong, export growth is constrained by policy design gaps, cost disadvantages, and evolving global trade dynamics," NITI Aayog said in its Trade Watch quarterly report. "Sustaining export momentum will require a coordinated strategy that aligns incentives, market access, financing, and branding with long-term competitiveness. “

 

Since 2015, India's share in the global automotive import market has remained broadly around 1% with exports rising at a compound annual growth rate of 3.5%. The export growth is slightly lower than the global average of 3.9% due to slower growth in high demand segments such as passenger vehicles, tractors and motorcycles, the report said.

 

Global electric vehicle imports have risen nearly 30 times between 2020 and 2024 but India's participation remains negligible around 0.1% of global exports and imports, underscoring a widening gap between global momentum and India's trade footprint, NITI Aayog said.

 

"Strengthening quality standards, certification systems, and technology adoption, alongside fostering forward linkages in global supply chains, will be critical," the report said. "Coupled with domestic market strength, these actions can help India scale high-quality production, broaden market diversification, and capture a larger share of global automotive trade."

 

India's automotive industry needs to reorient the export basket towards high-demand segments, the report said. In global automotive demand, passenger vehicles account for about 71% but India has captured just around 1% of this market. In contrast, motorcycles represent roughly 3% of global demand and India's export share in this segment is about 9%. 

 

The report says that India needs to rationalise incentives, correct cost distortions, expand export-linked financing for emerging markets, reduce inland and port logistics costs, and accelerate domestic production of critical inputs such as electric vehicle batteries.

 

India also needs to strengthen regulatory standards to curb low-quality imports and improve branding at global platforms. The country needs to strengthen technology transfer through foreign joint ventures, the report said.

 

"China's experience shows how targeted foreign joint ventures can accelerate technology upgrading, quality improvements, and global market access in auto components," the report said. 

 

India should leverage free trade agreements with the US and Mexico for securing stable market access. It should also use lines of credit and embassy-led facilitation to expand presence in Africa, Latin America, and neighbouring markets, while addressing tariff and regulatory challenges in key destinations like Mexico and Association of Southeast Asian Nations' economies.

 

India must look at broadening the coverage of the automotive production-linked incentive scheme beyond electric vehicles. It may also look at easing eligibility thresholds for startups and micro, small, and medium enterprises, and ensure that localisation goals are aligned with domestic demand realities, the report said.  End

 

Reported by Shubham Rana

Edited by Akul Nishant Akhoury

 

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