This ambition rests on strong fundamentals—robust domestic demand, expanding exports, technological transformation, green mobility initiatives, and world-class infrastructure development.
- India’s automobile industry has reached a decisive moment in its economic history.
- With India overtaking Japan to become the world’s third-largest automobile market, the country is no longer just a manufacturing base—it is emerging as a global mobility leader.
- Union Minister for Road Transport and Highways Nitin Gadkari has articulated a bold national vision: India aims to become the world’s No. 1 automobile manufacturing nation within the next five years.
India has solidified its position as the world’s third-largest automobile market, surpassing Japan earlier this year, with an industry valuation exceeding ₹22 lakh crore (approximately US$260 billion). This milestone underscores the sector’s rapid growth, driven by robust domestic demand, government incentives, and a shift toward electric vehicles (EVs). Union Minister for Road Transport and Highways, Nitin Gadkari, has reiterated the government’s ambitious vision: to propel India to the number one global auto market by 2030, creating millions of jobs and boosting exports to unprecedented levels.
India’s Current Position in the Global Automobile Industry
India today stands behind only the United States and China in terms of automobile market size.
- US automobile industry: ₹78 lakh crore
- China automobile industry: ₹49 lakh crore
- India automobile industry: ₹22 lakh crore
The sector has already generated over 4.5 crore jobs, making it one of the largest employment creators in the country.
India is:
- Second-largest manufacturer of two-wheelers
- Largest manufacturer of three-wheelers
- Third-largest manufacturer of passenger vehicles globally
These figures reflect not only scale but also structural maturity.
Overtaking Japan: A Historic Leap
In September 2025, Minister Gadkari announced at the International Value Summit in New Delhi that India had eclipsed Japan to claim the third spot in global automobile markets, trailing only China and the United States. This achievement reflects a compound annual growth rate (CAGR) of over 10% in vehicle sales since 2020, fueled by rising middle-class incomes, urbanization, and infrastructure development. The Indian auto sector, which contributes about 7.1% to the national GDP, now produces over 25 million vehicles annually, with two-wheelers accounting for nearly 80% of the volume.
According to the Society of Indian Automobile Manufacturers (SIAM), domestic sales in fiscal year 2024 (April 2023–March 2024) reached 23.9 million units, marking a 8.5% year-on-year increase. In the ongoing fiscal year 2025–26, sales momentum has continued, with passenger vehicles (PVs) totaling 1.01 million units in the first quarter (April–June) and 1.04 million in the second quarter (July–September). October 2025 alone saw PV sales surge 17.2% to 461,000 units, while two-wheeler sales hit 22.11 million units, up 12% from the previous year. Year-to-date through October 2025, total vehicle sales stand at 3.7 million units, projecting an annual figure of around 25 million.
The Press Information Bureau (PIB) highlighted that this growth has positioned India as a key player in global value chains, with auto component production valued at ₹4.5 lakh crore and exports reaching ₹1.5 lakh crore in FY24.
From Assembly Hub to Global Export Base
A major transformation underway is India’s shift from being an assembly-driven market to an export-oriented manufacturing hub.
- All major global automobile brands now operate in India.
- Manufacturers are increasingly exporting vehicles from India to global markets, instead of merely assembling them for domestic sale.
- The two-wheeler segment alone exports more than 50% of its production, highlighting India’s cost competitiveness and manufacturing efficiency.
This transition strengthens India’s position in global value chains and boosts foreign exchange earnings.
Government Vision: Targeting Global Dominance by 2030
The government’s blueprint for auto sector dominance is enshrined in policies like the National Automotive Policy and the Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme. Minister Gadkari emphasized during the summit that targeted reforms could elevate India’s share in global auto component trade from 3% to 8% by 2030, potentially tripling exports to US$60 billion. The auto component sector as a whole aims for US$100 billion in exports by the decade’s end, as stated by Union Minister of Commerce and Industry, Piyush Goyal, in September 2024.
Green Mobility: Redefining the Future of Transportation
India’s automotive growth is closely aligned with sustainability and clean energy goals.
Electric Vehicles and Alternative Fuels
- Electric vehicles are growing at a CAGR of over 10%, supported by policy incentives and falling battery costs.
- Hybrid vehicles are gaining acceptance as a bridge between conventional and electric mobility.
Hydrogen Mobility
- India has already launched hydrogen-powered trucks.
- Pilot projects are running across ten national routes.
- The government has allocated ₹600 crore to accelerate hydrogen infrastructure.
Major Indian companies such as Tata Motors, Ashok Leyland, Reliance, and Indian Oil are active partners in this green transition.
A cornerstone of this strategy is electrification. The government targets 30% of the vehicle fleet to be electric by 2030, with annual EV sales projected to reach 10 million units. This shift is expected to generate 50 million jobs across the EV ecosystem, including battery manufacturing and charging infrastructure. Gadkari noted that India could soon export lithium-ion batteries, reducing import dependence from over 90% today. The Ministry of Heavy Industries’ draft National Automotive Policy envisions the sector employing over 37 million people directly and indirectly by 2030, up from 19 million currently.
Biofuels and Ethanol Blending: Reducing Energy Dependence
India’s ethanol blending programme has reached 15% in 2024, moving steadily toward the 20% target by 2025–26.
This initiative:
- Reduces crude oil imports
- Supports farmers and rural incomes
- Cuts vehicular emissions
- Strengthens energy security
Biofuels are emerging as a practical and scalable solution for India’s mobility needs.
| Key Auto Sector Metrics (2025) | Value |
|---|---|
| Total Domestic Sales (FY24) | 23.9 million units |
| Passenger Vehicles (Q2 FY26) | 1.04 million units |
| Two-Wheelers (Oct 2025) | 22.11 million units |
| Industry Valuation | ₹22 lakh crore (US$260 billion) |
| Auto Component Exports (FY24) | ₹1.5 lakh crore (US$18 billion) |
Source: SIAM and PIB
Challenges and Opportunities Ahead
While India’s auto market thrives, challenges like supply chain disruptions and raw material costs persist. However, initiatives such as Production Linked Incentive (PLI) schemes have attracted over ₹25,000 crore in investments from global giants like Tesla and Tata. The sector’s R&D spend, which accounts for 40% of the global engineering total at US$31 billion, positions India as an innovation hub.
By 2030, projections from NITI Aayog suggest auto component production could hit US$145 billion, with EVs driving 40% of growth. As Gadkari put it, “India is not just building vehicles; we are building a sustainable mobility future.”
With these strides, India’s journey from the third to the first largest auto market appears not just aspirational, but achievable—poised to redefine global automotive leadership.
Demographic Strength and Market Expansion
India’s automobile market is strongly supported by demographic trends:
- 65% of the population is under 35
- Rising incomes in Tier-2 and Tier-3 cities
- Migration-driven demand for personal mobility
- Growth of suburban employment hubs
- Expansion of vehicle subscription models
As a result:
- Personal users account for over 76% of automobile demand.
- Two-wheelers and compact cars remain key growth drivers.
Fuel Mix: Transition in Progress
- Petrol vehicles still dominate with nearly 60% market share, due to affordability and infrastructure availability.
- Electric, hybrid, CNG, and alternative fuels are steadily expanding their footprint.
This diversified fuel ecosystem allows India to transition gradually yet decisively toward clean mobility.
A Call for Global Collaboration
India’s message to the world is clear:
The country does not lack resources—it seeks innovation and partnership.
Opportunities exist in:
- Precast road construction
- Tunnel engineering
- Hydrogen transport systems
- Circular economy technologies
- Advanced mobility solutions
With monetized roads and strong revenue streams, India offers a stable platform for global investors and innovators.
The journey from the third-largest automobile market to the world’s No. 1 represents:
- Economic empowerment
- Employment generation
- Technological leadership
- Environmental responsibility
