India is the largest tractor manufacturer, second-largest bus manufacturer, and third-largest heavy truck manufacturer in the world and is expected to be the world’s third-largest automotive market in terms of volume by 2026. In FY2021, the country produced around 22.7 million units of vehicles, keeping pace with the rise in the passenger vehicle industry which is expected to post a growth of 22% – 25% in FY22.

As the market for electronic vehicles picks up pace, the government is focused on boosting indigenous manufacturing of automobiles and allied sectors. This allows for achieving the twin benefits of reducing import bills on crude oil and auto parts, as well as reaching the country’s target of reducing the emission intensity of its gross domestic product (GHG emissions per unit GDP) by 33% – 35% by 2030.

Growth potential in EVs: The Indian Electric Vehicle market was valued at USD 1434.04 billion in 2021, and the industry is expected to create five crore direct and indirect jobs by 2030. A report by NITI Aayog identified a market size of USD50 billion for the financing of EVs in 2030—about 80% of the current size of India’s retail vehicle finance industry. The Electric Vehicle (EV) market is expected to grow at a CAGR of 44% between 2020-2027 and hit 6.34 million-unit annual sales by 2027.

The dominance of two-wheelers: Two-wheelers have been the predominant vehicle type produced in India and occupy the largest share of automobiles sold domestically. The segment, expected to be valued at USD2 billion by 2025, has three subcategories—motorcycles, scooters, and mopeds.
Two-wheelers are expected to be one of the early adopters of electrification as government incentivizes battery-powered vehicles, fuel prices continue to rise, and consumers become more aware of the environmental impact of fuel emissions.