India has the potential to become a key player in the global automotive supply chain: NITI Aayog Report

According to a report by Niti Aayog, the Indian automotive industry can become a key player in the Global Value Chain (GVC) as the world transitions to electric mobility, autonomous driving, advanced driver assistance systems (ADA), the Internet of Things (IoT) and sustainable production.

While the local automotive industry has made great strides, making India the fourth largest automotive producer in the world, second only to China, the United States and Japan, its share of the globally traded auto parts market remains moderate, at just 3% ($20 billion) ($20 billion), reflecting untapped potential and potential challenges.

According to the report, “Nearly 10% of trade balances face structural barriers that hinder their competitiveness due to competitors such as India’s automotive components sector, near-neutral trade balances and accumulated cost disabilities.”

“These include inefficiencies in supply chains, high material and equipment costs, and limited penetration in high-precision segments such as engines and transmission systems,” it said.

The report envisions a bold future for automotive component production in India, which predicts that by 2030, it could reach $145 billion in size and triple the export of automatic components to $60 billion, generating a $25 billion trade surplus.

It stressed that this growth is expected to create 20 to 2.5 million additional direct work, strengthen the ancillary industry and increase India’s GVC share to 8%.

“Covid-19-19 reveals supply chain weaknesses, and recent geopolitical uncertainty and disruptions contributed to prompt manufacturers to seek more reliable and cost-effective production centers,” Niti Aayog Vice Chairman Suman K. Beri said in a message to the report.

“In this case, India offers a unique opportunity to become a trusted global manufacturing partner. With its expanded production capacity, competitive costs, skilled workforce and technical expertise growing, India plays a greater role in the global automotive supply chain,” he said.

According to the report, one of the most important shifts in the global manufacturing sector is the increase in interdependence between the automotive industry and advanced sectors such as electronics, semiconductors and artificial intelligence.

“With these cutting-edge technologies, the cost of semiconductor chips per vehicle is expected to double, rising from $600 to $1,200 by 2030,” it said.

The global automotive components market is worth approximately US$2 trillion in 2022, highlighting its key role in the global automotive industry. About 30% (or $700 billion) of this constitute the market for the transactional automotive components.

According to the report, achieving this ambition requires a consistent effort to address cost shortcomings, enhance infrastructure and integrate advanced technologies (such as Industry 4.0).

Report mark: “The shift to electric vehicles (EVs) and next-generation features (such as ADAs) further underlines the urgency of aligning Indian capabilities with global trends.”

To achieve this vision, NITI Aayog proposed a comprehensive set of fiscal and non-financial interventions.

These include target operational support for capital expenditure support for identified components and tools and dyes, enhanced cluster development of supply chains, improved R&D measures, and skill building plans to develop talents.

“It is also crucial to promote international cooperation through joint ventures and free trade agreements, as well as efforts to raise quality standards and build globally competitive brands for Indian automotive components,” the authorities said.

“This holistic approach is designed not only to increase export potential, but also to use India as a hub for high-quality, technology-driven manufacturing. The timely implementation of these recommendations provides a powerful way to unlock India’s potential, drive economic growth, create jobs and technological advancement,” it added.