India: now a major market, underpinned by rising investment by global players

India’s automotive industry may finally be ready to take advantage of the inherent potential of the domestic market and exploit global business opportunities. Both domestic and international players are investing in additional manufacturing capacity in the country and there are signs that this could include Chinese vehicle companies before too long.

The Chinese government has previously warned Chinese companies against investing in India. However, with India having agreed trade deals with the UK, the EU and the US, the Chinese government may now conclude that India will offer its own companies increasing potential and it would be a mistake to bar them from India in perpetuity. 

The domestic market is growing strongly 

The Indian light vehicle market has grown for each of the last four years, despite the global economic and geopolitical volatility of recent years. having reached 5.2 million units in 2025, an increase of around 6%, the market is expected to reach 5.5-5.6 million units in 2026. Most of the growth in 2025 came between September and the end of the year, the first eight months of 2025 having seen modest growth. The late 2025 growth was in large part down to changes in the GST (general sales tax) regime cutting the tax rate on vehicles less than four metres long from 28% to 18%.

This improved consumer sentiment which had been depressed somewhat in anticipate on these changes. Further GST ameliorations and rising disposable income in 2026 are expected to give a further boost to recent growth. It is worth noting that EU imports into India are generally more than four metres long and face a much higher GST charge of 40%.

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The impact of this change in GST was clear in the December registrations figures; Suzuki was up 37% year-on-year at c179,000 for the last three months of the year; Mahindra rose 23% to 51,000, Tata rose nearly 14% at 50,000, while other large players, Hyundai, Kia and Toyota also rose strongly. For the full year 2025, Suzuki continues to lead, but both Mahindra and Tata overtook Hyundai. With nearly 4.5 million passenger cars (and another 1 million LCVs) sold last year, the Indian market was almost on a par with Japan’s volumes; Japan is the third largest single country car market in the world after the US and China. 

The Indian market is also slowly opening up to competition from imports following the trade deals which the country has signed in recent months. However, Indian consumers’ vehicle purchase and preference histories for small cars mean that domestic production is likely to continue to dominate the sales charts. As the market opens up, international car companies see India as offering significant growth; for example, when the Indian version of the Duster SUV (sold as a Renault rather than as a Dacia there) was launched, a renault spokesperson suggested the Indian market could reach six million units a year by 2030.

A trade deal with the EU means that tariffs on some EU imports will reduce from 110% to 35% in the first year of the India-EU trade deal and to 10% within the next decade. While this gives EU manufacturers a chance to increase exports to India, the likelihood is that A- and B-segment cars – which still make up most of the Indian car market – will continue to be supplied from India rather than being imported. It is important to note however that this reduced tariff applies to vehicles with a minimum price equivalent to 15,000 euros. This in turn favours low-cost/low-price Indian-made vehicles.

Imports from the UK are subject to similar tariffs as those from the EU. UK and EU imports are also subject to quotas, 37,000 per year for the UK and 100,000 per year initially for the EU, rising to 160,000 in the next five years. Imports above these quotas will face a much higher tariff of between 60-95%. It is worth noting moreover that the tariff reductions apply to ICE and HEV vehicles while PHEVs and full EVs will not see any tariff reductions until the first five years of the agreement have passed.

Production growth for domestic and export markets 

The biggest manufacturer in India is Maruti-Suzuki, which produced just under 2.1 million vehicles last year, a rise of 10%. Hyundai-Kia production totalled nearly 1.1 million and Mahindra made nearly 600,000 units, making it the largest of the wholly-Indian-owned manufacturers with an annual rise of 12%. Tata produced nearly 560,000 across its passenger and commercial arms, while Toyota Kirloskar made just over 400,000 units. The chart below shows 2025 production by company and how the top five producers have a production share of nearly 89%.

 This concentration may well increase further in the years ahead following recent investment announcements by Suzuki, Toyota and domestic brands. Investments in car production capacity continued to grow; in February Suzuki said it would invest US$7.7bn by 2031, increasing capacity from 2.5 million units to 4 million a year. Some of this will be for electric vehicles and the company has already started shipping the eVitara to Europe. Meanwhile, Hyundai is investing US$5bn in India by 2030, while Toyota will invest more than US$2.25 bn. 

While the Indian government wants to increase investment in production in the country, it has also taken measures to avoid an explosion in kit assembly operations: SKD units are subject to a 30% tariff (up from 15%) and CKD units now face a 15% tariff (up from 10%). Volkswagen has fallen foul of these rules in the past and as of early 2026, Skoda-Volkswagen India is fighting a $1.4 billion tax evasion claim from Indian authorities, covering a period of 12 years in which Volkswagen is alleged to have misclassified vehicle imports to evade higher tariffs. The authorities allege that Volkswagen imported nearly complete cars broken down into parts to pay lower import duties (5-15%) instead of the required 30-35% for CKD kits which applied for much of the period concerned. 

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In addition to investment by vehicle companies, it is worth noting that investment is also taking place in the supply chain as vehicle companies increase local content at their Indian operations. For example, Aisin is investing just over $US$200m in two new factories, one for conventional automatic transmissions and body parts, the other for CVTs. Currently Aisin imports transmissions from Japan, having already switched production of eAxle drivetrains for Indian-made EVs to one of Toyota’s own Indian factories. 

It is also important to note that as well as looking to take advantage of the domestic market, investment in India is also being made to take advantage of export opportunities, notably Europe. Indian-made vehicles are already shipped to Japan, South America, much of Africa and the Middle East. Some Suzukis, Toyotas and Hyundais have made it to Europe in recent years. Current European export volumes are low, less than 2% of total vehicle exports, although their value is rising. The value of exports to the UK, Germany, Spain and Norway last year worth just US$63 million in 2024/25 but amounted to cUS$150 million in the first half of 2025/26.

In unit terms exports to Europe totalled c90,000 in 2024/2025; and between April and August 2025, exports to Europe rose to more than 110,000, suggesting that total exports for 2025/2026 will likely be more than double the previous year. Global exports from India for the first half of 2025/2026 totalled nearly 515,000 units and could well total more than one million for a full year. India is clearly poised to be a major player on the international automotive stage.