India’s automobile industry has grown significantly, reaching Rs. 22 lakh crore (US Rs. 78 lakh crore, China Rs. 47 lakh crore). With 9% sales growth, 26.1 million units were sold in 2024. The sale of electric vehicle (EV) market surged to 1.408 million units, driven by initiatives such as FAME I and II. Advancing alternative fuels like ethanol, biodiesel, and electric energy, alongside innovative projects, e.g., ropeway cable cars have gained traction.
Demand and Supply Status of Automobile Industry of India
The Indian automobile industry grew robustly across vehicle categories, driven by strong demand from rural and urban areas, and favourable economic conditions.
Commercial Vehicles
The production and sales of CVs steadily recovered to a peak of over 1 million units. Exports peaked in FY 22 but declined significantly afterward, recovering marginally subsequently.
Passenger Vehicles
Production and sales surpassed 4.5 million units by FY 23 and could grow to over 5.6 million units by FY 27. Export volumes also grew significantly from 404,397 units in FY21 to an estimated 841,593 units in FY 27.
Two & Three Wheelers
Two-wheelers and three-wheelers are supported by buoyant domestic demand and improved market positioning. Production and sales exceeded 20 million units by FY 23 and could grow to over 27 million units by FY 27.
Retail Growth in 2024
Retail automobile industry grew 9% year-on-year (YoY) during calendar year 2024 (CY24). The two-wheeler (2W), three-wheeler (3W), passenger vehicle (PV), and tractor segments grew 10.78% (Y-o-Y), 10%, 5%, and 2.5%, respectively, while commercial vehicle (CV) retails remained flat.
Growth in the 2W segment was driven by improved supply chains, the launching of new models, and robust rural demand. But financing constraints and rising competition from electric vehicles (EVs) are constraints. CVs grew modestly due to elections, reduced infrastructure spending, and weaker-than-expected demand in the coal and cement industries. The PV segment, however, benefited from robust network expansion and product launches. Margin pressures because of higher inventory levels prompted a discount war. There are issues of evolving dynamics, demand recovery and innovation, alongside persistent challenges, such as regulatory pressures, pricing constraints, and the need for optimized production capacity.
EV Segment
EV sales in India surged to 1.408 million units in 2024, achieving a 5.59% market penetration (4.44% in 2023) because of technological advancements, heightening environmental consciousness, and enabling government policies. The share of electric car sales in total sales was about 2.5% in India in 2024.
The luxury EV market recorded modest growth of 6.7% in 2024, with most automakers witnessing declining sales. Overall, electric passenger vehicle retail sales, however, surged. Tata Motors led the broader EV segment with 61,496 units sold, followed by JSW MG Motors at 21,484 units. BMW, Mercedes-Benz India, Volvo Cars India, Audi, and Porsche sold 2,809 EVs in 2024, up from 2,633 units in 2023.
Luxury Segment Prospects
The luxury car segment in India witnessed improved supply chain stability and sustained demand for key models, resulting in satisfactory sales growth in FY25. Growth in FY26 may remain moderate, given the turbulence in financial markets and ongoing global geopolitical uncertainties.
About 51,000 luxury cars were sold in FY25. This growth momentum may not be sustained because these are tumultuous times due to the disruptive tariff whiplash of President Donald Trump. Things have now been shelved for 90 days. It is unclear how things will unfold subsequently in this world of surging protectionism, rising geoeconomic fragmentation, and heightening global tensions threatening the collapse of the Bretton Woods world economic order built assiduously over the decades.
Market share of Original Equipment Manufacturers (OEMs)
Two-Wheeler OEM
Hero Motocorp led in two-wheelers with 29.02% market share (54.9 lakh units), but its dominance eroded (down from 31.33% in CY’23) as Honda Motorcycle and Scooter India surged to 25.37% share (47.98 lakh units), registering a 21% YoY volume growth. TVS Motor grew marginally to 17.13% share, likely aided by premium models like Apache and its EV portfolio. The EVs are out-performing the market with better OEMs – Ola Electric doubled its share to 2.15% (4.08 lakh units, +52% YoY), while Ather Energy rose to 0.67% share (+20% YoY). Legacy players like Bajaj Auto Group faced slight declines (11.84% to 11.55%), with its EV subsidiary Chetak Technology contributing negligible volumes.
Three-Wheeler OEM
Bajaj Auto maintained leadership (35.92% share) in the Three-wheeler segment but faced marginal erosion, while M&M capitalized on electrification. Mahindra Last Mile Mobility, its EV-focused arm, skyrocketed to 6.1% share (74,480 units, +461% YoY), propelling Mahindra’s combined share to 12.3% (up from 6.6% in CY’23). Smaller EV players like YC Electric (+8% YoY) and Saera Electric (+15% YoY) also expanded, though Bajaj and Piaggio still dominate the ICE segment.
Commercial Vehicle OEM
Tata Motors led the CV segment but lost significant share (36.4% to 34.4%), despite selling 3.46 lakh units. Mahindra & Mahindra (M &M) acquired 24.98% share (2.51 lakh units, +6% YoY), driven by demand for small CVs and last-mile logistics vehicles. Ashok Leyland held steady at approximately 16.5% share, while VE Commercial Vehicles and Force Motors posted modest gains. The segment reflects rising competition, with Tata facing pressure to innovate in a market increasingly prioritizing cost-efficiency and versatility.
Passenger Vehicle OEM
Maruti Suzuki (40.26% share) led in the PV segment but lost marginally due to slower SUV portfolio expansion. M &M’s share rose to 12.03% (4.9 lakh units, +21% YoY), fuelled by robust demand for its Thar, XUV700, and Scorpio-N SUVs. Toyota Kirloskar grew 34% YoY (2.59 lakh units), leveraging the Hyryder SUV, while Kia India held steady with 58,300 units. Luxury brands like Mercedes-Benz (+11.5% YoY) and BMW (+14% YoY) capitalized on premiumization trends. EV players MG Motor (+5.4% YoY) and BYD (+40% YoY) grew, though volumes remain niche.
Tractor OEM
M &M consolidated its leadership, with its tractor and Swaraj divisions jointly capturing 41.95% share (up from 40.54%). Escorts Kubota (9.78% down from 10.4%) and TAFE (11.54% down from 11.84%) lost ground, while John Deere (+3.5% YoY) and Eicher Tractors (+5% YoY) gained, reflecting demand for high-horsepower machinery. The segment highlights rural resilience, with total tractor sales growing 2.5% YoY.
EV Charging Station Infrastructure
India’s EV market is growing rapidly, but the charging infrastructure remains a critical bottleneck though 25,202 public EV charging stations (EVPCS) were installed nationwide.
India has a poor EV-to-charger ratio of 1:400, lagging behind global benchmarks. Challenges include slow charging speeds (2-3 hours), fragmented regulations, grid instability, and resistance from residential societies. India needs 1.32 million charging stations by 2030 to support 50 million EVs, requiring massive annual installations of 400,000 chargers. Collaborative efforts with policymakers, industry players, and innovators aim to scale infrastructure, improve grid management, and achieve India’s 2030 target of 30% EV sales, ensuring sustainable mobility growth. A renewed thrust on localizing supply chains and enhancing battery technologies is on.
Institutional Initiatives
The Government policies target 30 % EV adoption for private cars and up to 80 % for two- and three-wheelers by 2030, accelerating domestic EV manufacturing. The Ministry of Heavy Industries is actively implementing several schemes, including the Electric Mobility Promotion Scheme (EMPS)-2024, which allocated ₹500 crore over four months (April–July 2024). This scheme incentivized buyers of electric two-wheelers (e-2Ws) and three-wheelers (e-3Ws), focusing on reducing their upfront costs.
This growth is attributable to rising consumer trust, government incentives like the Production-Linked Incentive (PLI) scheme, and industry innovation. The PLI scheme for the auto sector, with a ₹25,938 crore budget, approved 82 of 115 applications, projected to attract ₹42,500 crore in investments, generate ₹2.31 lakh crore in incremental sales, and create 140,000 jobs over five years, with ₹20,715 crore invested and ₹10,472 crore in incremental sales already recorded by September 2024. Despite global challenges, India’s automotive sector grew 9% year-on-year, retailing 26.1 million vehicles in 2024, reflecting robust domestic demand and resilience.
PLI Scheme for the Automobile and Auto Component Industry (PLI-AAT), with a budgetary outlay of ₹25,938 crore, supports the manufacturing of various EV categories, including e-2Ws, e-3Ws, e-4Ws, e-buses, and e-trucks. The PLI-ACC Battery Storage Scheme, with an allocation of `18,100 crore, aims to enhance domestic production of advanced chemistry cell batteries.
Industry Risks and Challenges
China’s dominance in the EV sector, where manufacturers like BYD and SAIC leverage state subsidies, economies of scale, and control over critical battery supply chains to produce EVs at 20–30% lower costs than Indian counterparts cause concern. Stringent regulatory pressures from the European Union, including Euro 7 emission norms and carbon border taxes, raise compliance costs for Indian exporters by 15–20%. European automakers like Volkswagen are also shifting to “local-for-local” manufacturing to bypass tariffs, reducing demand for Indian exports. Japan and South Korea continue to lead in hybrid and hydrogen technologies.
India’s dependence on China, Taiwan, and South Korea for 90% of its semiconductors led to production delays, e.g., M & M’s EV rollout setbacks in FY 24. Similarly, China’s control over 75% of global battery production (Lithium-ion batteries) leaves Indian manufacturers scrambling to secure affordable cells, with domestic capacity meeting 5% of demand. Rupee’s 12% depreciation against the dollar (2021–24) raised costs, while non-tariff barriers-the EU’s proposed carbon tax and the U.S. Inflation Reduction Act’s local-content rules- disadvantage Indian exports.
Unsold inventory of nearly 8 lakh cars (worth ₹79,000 crore) due to rising vehicle prices, taxes, and regulatory compliance (e.g., BSVI norms), and reduced buyer affordability causes concern. Regional economic disparities, poor demand forecasting, inadequate digital infrastructure, and delayed EV policy adoption further exacerbate inventory mismanagement, demanding urgent solutions to stabilize the sector’s sustainability and profitability.
Broader Macroeconomic Risks
Rising EV adoption has broader macroeconomic implications, viz., report Driving Decarbonisation: Cross-Sectoral Second Order Impacts of High EV Penetration in India (March 2025) from London’s Imperial College Business School. Should the sales of EVs zoom to 25% of all vehicles sold in India (up from around 8 % currently), this could imperil traditional car manufacturing. Furthermore, if electric vehicles account for 25% of all vehicles in India, electricity usage in the country could rise by almost 60%, necessitating consequential upgrades to the electricity grid. This paradigm shift requires focused attention on multiple areas, viz., government and private sector investment, the right infrastructure, time-of-use tariffs to incentivise charging at low-demand times and installed renewable energy capacity.
While such tectonic changes will impact both the automobile industry and the individual companies, there will be a differential impact on India’s three largest car manufacturers, viz., Maruti-Suzuki India, M&M, and Tata Motors. Sustainability-linked bonds – financial instruments linked to specific ESG goals could be considered to harmonize financial incentives and sustainable development goals (SDGs).
The Way Ahead
The industry must strategically navigate global competition and accelerate its transition to electric mobility with a multi-pronged approach- R&D investments, domestic component manufacturing, and a comprehensive EV ecosystem. Addressing infrastructure bottlenecks, including charging stations and road quality, and streamlining regulatory processes, are crucial for sustained growth and export competitiveness. Targeted policies must also support MSMEs in the auto component sector and manage the current issue of high inventory levels.
A holistic approach requires accessible and reliable charging infrastructure, addressing range anxiety and affordability concerns, and skilled workforce. Simultaneously, the industry must proactively address competition from established global players by investing in indigenous technologies, particularly in hybrid and hydrogen fuel cell vehicles, and developing effective export strategies to penetrate new markets. Rationalizing the GST structure for hybrid vehicles and smaller two-wheelers can enhance market growth and accessibility.
The success of India’s automotive industry requires a collaborative and synergistic effort with the government, industry, and research institutions. With an accent on competition, supply chain vulnerabilities, innovation and infrastructure development, India can strengthen its global position.
(Full Report may be accessed at
https://www.infomerics.com/publication-detail/automobile-industry-outlook-2025-bumpy-ride-ahead)
ABOUT THE AUTHORS
Dr. Manoranjan Sharma is Chief Economist, Infomerics, India. With a brilliant academic record, he has over 250 publications and six books. His views have been cited in the Associated Press, New York; Dow Jones, New York; International Herald Tribune, New York; Wall Street Journal, New York.
Athar Imam Raza is an Officer – Economic Analysis, Infomerics India, with over nine years of industry experience in macroeconomic research and reporting. He specializes in analyzing economic trends, preparing detailed reports, and forecasting outlooks.
