Western carmakers rethink India: Factories, exports and uncertain futures
As the world’s third-largest car market matures, European, American and Chinese manufacturers are recalibrating their Indian strategies
India’s automotive sector is in flux. For Western multinationals, the country has long promised more than it has delivered – a vast, aspirational consumer class offset by ferocious local competition, import tariffs that make foreign models prohibitively expensive, and utilisation rates that rarely justify the capital deployed. Yet the picture in 2025 and into 2026 is not one of retreat. Instead, it is one of recalibration: shifting emphasis from domestic sales to export led manufacturing, seeking joint ventures with Indian partners, and – in several cases – betting that India’s engineering cost base can supply the world with the conventional engines that Europe no longer wants to build at home.
The Chennai investment is widely interpreted as Ford’s plan to eventually release Sanand to Tata entirely, replacing Sanand’s outputwith a newer, larger-scale operation
Ford: Engines over cars
Ford’s relationship with India has long been complicated. It exited passenger car production in 2022 and has no plans to return. Yet it is not walking away. In November 2024, the company announced a US$370m investment to revamp its shuttered powertrain factory in Chennai, with production of a new engine range expected to begin by 2029 at a rate of 235,000 units annually. The surrounding region offers a well-developed engine components supply base, making the location commercially logical.
In the interim, Ford continued building engines at its Sanand factory – a plant it had sold to Tata Motors in 2023 but retained access to under a leaseback arrangement. That facility has been producing engines for the Ranger pick-up truck assembled in Thailand. The Chennai investment is widely interpreted as Ford’s plan to eventually release Sanand to Tata entirely, replacing Sanand’s output with a newer, larger-scale operation. Export destinations for the Chennai engines have not yet been confirmed.
Renault and Nissan: An evolving alliance
The Renault-Nissan situation in India reflects the broader turbulence in their global partnership. The pair previously shared a joint venture factory in Chennai, with Nissan holding a 51% stake. As Nissan’s financial difficulties deepened, it sold that stake to Renault, which now has full ownership of the plant.
Renault has since designated the Chennai factory its fifth core manufacturing location outside Europe, committing US$600m to expand production. The plant will build SUVs for both brands – Renault for its own sales network, and Nissan under a contract manufacturing arrangement. Key new models include the Duster SUV, sold in India under the Renault name rather than Dacia as in Europe, and the Nissan Tekton, its equivalent model. A seven-seat vehicle for both brands – thought to be a modified version of the Boreal built in Brazil – is also planned.
The factory’s utilisation has historically been poor, rarely reaching 50% of capacity. With both brands expanding their Indian ranges and targeting export markets across Southeast Asia and southern Africa, Renault believes the plant will reach 80% utilisation soon, potentially full capacity thereafter. For context, Renault sold just 38,000 vehicles in India in 2025, equivalent to a 1% market share – underlining how heavily the factory’s economics depend on exports. Nissan, despite selling its ownership stake, wants Renault to manufacture around 200,000 vehicles a year on its behalf, representing 40% of the plant’s total potential output, and is simultaneously expanding its Indian dealer network from 150 to 250 outlets.
Stellantis: Seeking to leverage a large Indian footprint
Stellantis sells fewer than 10,000 Citroëns and under 3,000 Jeeps a year in India – market share of well below 1% – yet its operational footprint in the country is remarkably extensive. The company runs its own small car plant in Tiruvallur, Tamil Nadu, producing around 30,000 Citroën models annually from a 60,000-unit capacity.
It has research and software development operations across four cities. Most significantly, it operates a 300,000-unit engine plant and a 375,000-unit transmission facility in Hosur – volumes that far exceed domestic demand and position Hosur as a global manufacturing hub.
Stellantis also holds a 50:50 joint venture with Tata Motors at Ranjangaon, which assembles Jeep models including the Compass, alongside a much larger volume of Tata vehicles. A memorandum of understanding signed in early 2026 points to an expansion of that partnership, though details remain undisclosed.
A US$110m investment programme is currently underway, aimed at widening the Citroën and Jeep ranges assembled in India and increasing local sourcing levels. Engines currently achieve 50% local content; transmissions reach 60%.
The future of the Hosur powertrain operation raises interesting questions. In November 2024, Stellantis declared it a global supply point, positioning India to lead on conventional engines and transmissions as European demand shifts to electric. Since then, however, Stellantis has sharply written down its EV investments and pivoted back towards internal combustion and hybrid vehicles in Europe – in some markets even reintroducing diesel options.
Whether Hosur’s role expands or contracts considering that reversal is unclear, not least because union and government pressure in France is likely to resist any straightforward transfer of powertrain production to India.
Germany’s luxury trio: Cautious and constrained
BMW assembles around 17,500 vehicles a year at a plant in Chennai, producing ten different models with a 50% local content rate – a creditable figure at such low volume, achieved partly through sourcing engines from local manufacturer Force Motors. In January 2026, BMW confirmed plans to launch additional models in India, including components for its iX1 electric vehicle.
Mercedes-Benz operates at similarly modest scale, with a 20,000-unit annual capacity. In September 2025, the company floated the possibility of expanding Indian production to create a sustainable export business – an idea aligned with the Indian government’s Make in India initiative. Mercedes briefly exported GLC SUVs from India to the United States in 2018-19, an episode that demonstrated the concept is not without precedent.
Volkswagen’s Indian situation is the most fraught. The group’s Pune plant has capacity for 250,000 units a year and produces Volkswagen and Skoda models; a smaller Aurangabad facility assembles Audis from imported kits. Combined volumes remain well below potential, with around 160,000 units produced in 2024 representing 64% utilisation. More pressingly, Volkswagen faces a tax dispute with the Indian government that could cost up to US$2.8 billion in penalties. Talks over a possible joint venture with Mahindra collapsed in late 2024. Reports from October 2025 suggested the company offered early retirement to all 2,300 workers at its Indian factories. Despite local success with the Kylaq and Kushaq SUVs – and modest kit exports to Vietnam and Latin America – Volkswagen has yet to find a coherent path forward in India.
Unlike state-owned Chinese rivals, BYD’s relative independence from Beijing may give it greater freedom to pursue overseas manufacturing – and India could be where it tests that freedom
New entrants: Vinfast and BYD
Vietnam’s Vinfast is preparing to open its first factory outside Vietnam in Tamil Nadu, with initial capacity of 50,000 units and the ability to scale to 150,000. The plant will produce the VF6 and VF7 electric SUVs, targeting both the Indian market and exports to Southeast Asia, the Middle East and Africa. Total investment is planned at US$2 billion, encompassing electric motorcycles and buses as well as cars. The company is in discussions with battery suppliers including Tata-Gotion for local sourcing.
China’s BYD, meanwhile, is weighing a semi-knock-down (SKD) assembly operation in India. The company sold around 5,500 vehicles in India in 2024 under existing import rules, facing a 110% tariff on fully built imports. Local SKD assembly would reduce that to 30%. A proposed US$1 billion investment in 2023 was not approved by Indian authorities, but with consumer demand for BYD vehicles growing, both sides are understood to be revisiting the question of market entry. Unlike state-owned Chinese rivals, BYD’s relative independence from Beijing may give it greater freedom to pursue overseas manufacturing – and India could be where it tests that freedom.
