New Delhi: India’s automotive trade basket is skewed towards low-demand or niche segments, underscoring a widening gap between global momentum and India’s trade footprint, according to NITI Aayog.
While passenger vehicles make up over two-thirds of global automotive demand, India accounts for just about 1 percent of that market. Instead, India’s export strengths lie in motorcycles and tractors, segments that together form a relatively small slice of global demand, says NITI Aayog’s latest Trade Watch Quarterly report for Q1 FY26, released Tuesday.
The report states: “In global automotive demand, passenger vehicles account for about 71 percent, and India has captured around 1 percent of this market. In contrast, motorcycles represent roughly 3 percent of global demand, and India’s export share in this segment is about 9 percent.”
Similarly, India’s global export share in tractors stands at 1.1 percent, even though tractors make up just 5.2 percent of worldwide automotive demand.
The imbalance becomes sharper in electric vehicles. While global electronic vehicle (EV) imports surged nearly 30 times between 2020 and 2024, India’s share in global EV trade remains negligible at 0.1 percent.
According to the report, India’s automotive sector has largely evolved to serve domestic demand, aided by high tariffs that protect local manufacturing and sales. As a result, export growth has been “selective and uneven”, with India failing to gain meaningful traction in high-demand categories such as passenger and goods vehicles.
Established exporters like Germany, Mexico and China continue to dominate these segments. Germany leads in passenger vehicles and premium components, Mexico has carved out a niche in goods vehicles and tractors, while China has emerged as a global powerhouse across motorcycles, commercial vehicles and electric vehicles.
On the import side, India’s finished vehicle imports have expanded faster than exports, clocking a compound annual growth rate of around 7 percent between 2015 and 2024. The report states, “India’s automotive imports are primarily concentrated towards passenger vehicles and niche segments, reflecting consumer preferences and technology-intensive models rather than broad-based dependence on foreign supply.”
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Slow growth & a bright spot
According to the report, global automotive and component demand stood at about $2.2 trillion in 2024, whereas India’s contribution was just $30 billion—roughly 1.4 percent.
While global imports of finished vehicles grew at an average annual rate of 4 percent between 2015 and 2024, India’s automobile exports grew at a glacial pace, from $9.4 billion to $13.2 billion, at a CAGR of 3.5 percent.
Auto components present a brighter spot. India’s component exports nearly doubled during the same period, growing at around 8 percent annually—much faster than the global average of 3 percent. Yet, even here, India’s share in global demand remains stuck at about 2 percent.
The report argues that while policy reforms, targeted fiscal incentives, and infrastructure developments have strengthened India’s position as a global automotive hub, its share in global automotive trade continues to remain modest.
What NITI Aayog recommends
In order to enhance India’s position in global automotive trade, NITI Aayog calls for strategic measures. The think tank suggests lowering tariffs, encouraging two-way trade, and reorienting production toward high-demand segments such as passenger vehicles and EVs.
The report also recommends widening market access by easing non-tariff barriers through better trade coordination and making smarter use of free trade agreements.
It suggests a fine-tuning production linked incentive (PLI) scheme for the auto industry to help companies scale, support MSMEs, and include non-EV segments.
“India needs to enhance export competitiveness by rationalising incentives and correcting cost distortions, expanding export-linked financing for emerging markets, reducing inland and port logistics costs, and accelerating domestic production of critical inputs such as EV batteries,” the report states.
With the automotive sector, the stakes are high for India. The sector employs nearly 30 million people in the country, consumes 15 percent of domestic steel and almost half of the country’s natural rubber, and supports a wide network of allied industries from electronics and IT services to glass, textiles and leather.
(Edited by Amrtansh Arora)
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