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NITI Aayog has recently released a comprehensive report titled “Automotive Industry: Powering India’s Participation in Global Value Chains”. It offers a roadmap to boost India’s role in the global automotive sector by enhancing competitiveness, production capacity, and export potential.

India’s Current Position

India is the world’s fourth-largest automobile producer, with nearly 6 million vehicles manufactured annually. However, its share in the global automotive component trade remains modest at 3%, primarily due to limited penetration in high-precision segments like engine components and drive transmission systems. The country exports auto components worth $20 billion, with major strengths in small cars and utility vehicles.

Global Landscape and Emerging Trends

Globally, 94 million vehicles were produced in 2023, with the automotive components market valued at $2 trillion, of which $700 billion was exported. The industry is witnessing rapid transformation through:

• Electric Vehicles (EVs): Rising demand, regulatory shifts, and battery innovations are reshaping manufacturing.
• Battery Ecosystems: Hubs in Europe and the US are altering global supply chains, focusing on lithium and cobalt.
• Industry 4.0: AI, IoT, robotics, and machine learning are revolutionizing automotive manufacturing through smart factories and digital supply chains.

Challenges to India’s GVC Participation

Despite a strong production base, India faces several hurdles in climbing the Global Value Chain (GVC):

• Low R&D spending and limited innovation
• High operational costs and infrastructural gaps
• Weak IP ecosystem and low brand visibility
• Inadequate skilling and moderate digital adoption

Strategic Interventions Proposed

NITI Aayog recommends a combination of fiscal and non-fiscal measures to address these gaps and strengthen India’s automotive ecosystem.

Fiscal Measures:

• Opex support to scale up production and infrastructure
• Skilling initiatives to build a trained workforce
• R&D incentives and IP transfer support for MSMEs
• Cluster development for shared R&D and testing facilities

Non-Fiscal Measures:

• Promoting Industry 4.0 adoption and quality manufacturing
• Ease of Doing Business reforms in labour, logistics, and regulations
• Global tie-ups and Free Trade Agreements (FTAs) to boost exports

Vision for 2030

By 2030, the report envisions:

• Auto component production to grow from ~$60 billion to $145 billion
• Exports to increase from $20 billion to $60 billion
• GVC share to rise from 3% to 8%
• Trade surplus of around $25 billion
• Employment generation of 2–2.5 million additional jobs