India can become $1 trn export-led automotive hub by 2035: Report

Consulting firm Arthur D Little, in a report released on Wednesday, projected that India's automotive industry could evolve into a $1 trillion export-led sector by 2035, driven by manufacturing, innovation, and technology. The report, titled "Transforming India into a Global Automotive Hub: Roadmap for the Automotive Ecosystem," estimates required investments to be between $100 billion and $150 billion.

To achieve this goal, investments are needed in platform development, manufacturing infrastructure, and Engineering and Research and Development (ER&D) centres. The report emphasises that local Original Equipment Manufacturers (OEMs) will be instrumental in actualising this vision.

Barnik Chitran Maitra, Managing Partner of Arthur D. Little, India & South Asia, remarked, “Of the $1 trillion opportunity, 40 to 50 per cent might be software-related. We estimate that around $500 billion will cater to the domestic market, spread across various segments. Although India hasn't made definitive decisions to phase out internal combustion engines (ICE), by 2035, electric vehicles could dominate domestic sales."

Currently, India is the fourth-largest global automotive market, generating $250 billion in FY23 and contributing 7.3 per cent to the national GDP. Yet, it trails behind leading automotive nations such as Germany, Japan, and South Korea.

The report suggests that by 2035, India's annual automotive revenues could touch $1 trillion, with an additional potential of $400 billion from the global automotive ER&D and software segments. This growth could increase the automotive sector's contribution to India's GDP to 10-11 per cent, potentially boosting overall economic progress. Moreover, India's automotive exports might reach nearly $500 billion by 2035.

Discussing electric vehicles, Barnik stated, “By 2035, the majority of domestic vehicle sales will likely be electric, encompassing hybrids and battery electric vehicles. On the export front, India's focus will primarily be on electric vehicles and associated platforms and components. At present, there's limited penetration of electric vehicles in India, save for three-wheelers and two-wheelers. By 2030, we anticipate four-wheeler electric penetration to be around 12-15 per cent, and nearly complete electrification of three-wheelers. Furthermore, commercial vehicles and two-wheelers will see electrification levels of around 40 to 50 per cent. By 2040, global OEMs might largely transition away from non-electric platforms."