Remant Negi | Team TrickyScribe: India, despite being the world’s fourth-largest automobile producer with nearly six million vehicles manufactured annually, plays a relatively minor role in the global value chain (GVC) of automotive components. According to NITI Aayog’s April 2025 report “Automotive Industry: Powering India’s Participation in Global Value Chains”, India’s contribution stands at a modest 3% of the $700 billion global traded auto component market. The country’s presence in precision-heavy areas like engine systems and transmissions remains limited—an opportunity waiting to be unlocked.
A Trade Balance on Thin Ice
India’s automotive component trade reveals a near-equal footing between imports and exports, each valued around $20 billion in FY24. India, however, lags behind in value-intensive segments such as drive transmissions, steering systems, and engine components, which together form 60% of the global traded value. The reason: a low share of just 2–4% in these technologically demanding domains, driven by limited domestic capabilities in precision manufacturing and quality assurance.
The China Gap: Cost Disadvantages Hold India Back
A significant roadblock in India’s GVC journey is its cost disadvantage—nearly 10% higher than China’s. This stems from high material and machinery costs, fragmented supply chains, and unfavourable tax and depreciation norms. For example, India’s 100% depreciation policy on capital assets, compared to China’s 50%, increases fixed costs by an additional 3.4%. These inefficiencies make India a costlier and less appealing option for global investors in high-end automotive manufacturing.
Vision 2030: From Backseat to the Driver’s One
The current constraints notwithstanding, the NITI Aayog report envisions a bold leap. By 2030, India aims to triple its component exports to $60 billion, raise total production to $145 billion, and command an 8% share in the global auto component trade. This growth is projected to generate over two million new jobs and push India into the ranks of top component exporters, alongside countries like Germany, Japan, and South Korea.
Policy Engine: Driving the Next Phase of Growth
The roadmap to achieving this vision is multi-faceted. On the fiscal side, the report suggests capital expenditure support for critical tools and dies, operational subsidies for key components, and R&D incentives to boost innovation. The emphasis is on strategically supporting high-value, high-potential segments, particularly in emerging domains like electric vehicles (EVs), autonomous driving systems, and advanced safety technologies.
Skill & Infrastructure: Building the Foundation
A core part of the strategy is strengthening India’s industrial and human capital base. Dedicated skilling programs—such as the proposed GVC Skilling India Scheme—will ensure a steady flow of trained manpower. Meanwhile, industrial cluster development is recommended to streamline logistics, enhance quality control, and enable shared R&D and testing infrastructure to reduce time-to-market for new products.
Going Global: Collaborate to Compete
International collaborations are another critical lever. The report encourages joint ventures and foreign technology partnerships to fast-track capability building. It also calls for proactive engagement in Free Trade Agreements (FTAs) to improve market access for Indian manufacturers. Branding support and adherence to global quality standards are seen as essential to reposition India as a reliable supplier of technologically sophisticated components.
Digital India on the Assembly Line
Digital transformation is pivotal. The report strongly advocates adopting Industry 4.0 tools such as AI, IoT, additive manufacturing, and smart factory models. These can significantly improve operational efficiency and enable Indian firms to produce complex, customized parts with global quality benchmarks. Given India’s strength in IT and software development, this is a natural advantage the country must leverage—especially in building systems for connected and autonomous vehicles.
Policy Tailwinds: Government Schemes Fuel the Ascent
A series of government initiatives have already laid the groundwork. Make in India, Atmanirbhar Bharat, the FAME scheme, and PLI for Auto and ACC Batteries are channeling investment and innovation into the sector. The newly launched PM E-DRIVE scheme, with an outlay of ₹10,900 crore, seeks to supercharge India’s EV ecosystem—from production to infrastructure—creating fertile ground for domestic and export-oriented growth.
India’s Moment to Lead
India’s share in the global automotive GVC may be small today, but the blueprint laid out by NITI Aayog offers a clear path to scale and global relevance. By addressing cost challenges, embracing digital technologies, investing in skill development, and forging global alliances, India can evolve from a volume-focused producer to a value-led powerhouse in automotive manufacturing. The next five years could well decide whether India remains a component supplier—or becomes a global industry leader with a distinct identity of its own!
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