Components surge ahead as India's export of finished vehicles stagnates

The report also points to a growing divergence within the sector as auto-component exports grew rapidly, while outbound shipments of finished vehicles expanded only modestly.

• India accounts for just 1% of global automobile trade, says NITI Aayog report
• Auto component exports doubled since 2015, but finished vehicle exports stagnate
• India's EV export share remains negligible despite global surge in EV trade

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India remains a bit player in the automobile market, accounting for just a percent of the global trade, which crossed $1.3 trillion in 2024, a NITI Aayog report has said, calling for a policy reset to revive automotive exports that have stagnated for 10 years.

Slower growth in high-demand segments such as passenger cars is the reason that India’s vehicle exports have been stagnant since 2015, even as its shipments of auto components have seen a big rise.

According to NITI Aayog’s Trade Watch Quarterly published this month, India’s export basket remains skewed toward two-wheelers and tractors, while passenger vehicles, which account for over 70 percent of global demand, were a weak spot, limiting the country’s ability to scale up finished-goods exports.

In bits and parts

The report also points to a growing divergence within the sector, as auto-component exports grew rapidly, while outbound shipments of finished vehicles expanded only modestly.

At a time when the global auto-components market grew steadily to $856 billion in 2024, India’s component exports expanded much faster, nearly doubling from $8.2 billion to $16.9 billion over 2015–2024. The growth was led by vehicle parts, rubber components, engine parts and diesel engines, where India outperformed global import growth.

This pattern suggests that India is emerging as a competitive supplier of parts and sub-assemblies, but has yet to transition to a strong exporter of complete vehicles and EVs, particularly in high-value passenger and electric segments.

The report highlights that India’s automobile industry continues to be driven by the domestic market, with limited two-way trade in fully built vehicles.

While localisation has improved and imports of finished vehicles remain relatively low, exports of passenger and commercial vehicles have not kept pace with global growth, reflecting structural constraints in cost competitiveness, standards alignment and market access.

“India must deepen market access through targeted trade diplomacy and scheme recalibration by addressing non-tariff barriers via MRAs and customs cooperation, strategically leveraging FTAs and Lines of Credit in priority markets, and mid-course correcting PLI-AUTO to support scale, MSMEs and non-EV segments,” the report noted.

Missed opportunity in EVs

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 said.

These measures have become especially urgent as global EV trade has surged sharply, while India’s presence remains marginal.

Despite a nearly 30-fold surge in global EV imports between 2020 and 2024, India’s participation remains negligible at around 0.1 percent of global exports and imports.

Though domestic EV adoption is accelerating, this momentum has not translated into export capability, the report said.

The way forward

India needs a coordinated reset of incentives, financing, logistics and market-access strategies to revive automotive export growth, NITI Aayog said, based on consultations with industry stakeholders.

The report said industry interactions pointed to structural cost disadvantages and policy design gaps as key constraints, even as production capabilities and domestic demand remain strong.

High logistics costs, estimated at around 8 percent of GDP, along with reliance on imported batteries, advanced components and precision machinery, continue to erode export margins and limit economies of scale.

Industry stakeholders also highlighted growing market-access barriers, including non-tariff measures such as regulatory checks, quarantine norms and documentation requirements across key markets.

Exporters flagged the need for stronger government-to-government engagement, including Mutual Recognition Agreements, smoother customs processes and faster re-import clearances.

At the same time, industry raised concerns over the design of the PLI-Auto scheme, noting that its EV focus and high domestic value-addition thresholds may be limiting participation by startups and smaller firms.

Stakeholders also flagged risks from counterfeit auto components, weak branding and low R&D intensity compared to global peers.

Industry consensus was that without faster progress on quality standards, technology transfer, battery manufacturing and innovation, India risks remaining competitive in components and assembly but falling short as a large-scale exporter of finished vehicles and EVs, NITI Aayog said.