The tensions between China and the US on top of the deadly pandemic that is tormenting the world has forced many automotive manufacturers to shift production out of China. Also, with globalization levelling the world, it has become crucial for manufacturers to find a suitable spot for outsourcing automotive manufacturing to stay competitive. India, owing to its well-developed infrastructure and easy availability of trained and laborers has become an attractive location for manufacturers to set up their automotive manufacturing plant.

Why is India the best spot for outsourcing automotive manufacturing?

India, being the 4th largest automobile manufacturer with the potential to grow more has got the attention of manufacturers and entrepreneurs around the globe. India has over 5000 car dealerships across 523 cities and Automobile manufacturing constitutes 7% of India’s GDP. India has also become a designing and manufacturing hub with an increasing presence of global OEMs and well-developed auto- component exports. Being one of the world’s fastest-growing large economies that signifies large growth opportunities and stability due to relative protection from various geopolitical events, India is projected to become the 3rd largest manufacturer globally by 2025.

Government policies supporting automotive manufacturing in India

The Indian government has also announced many policies to encourage new automotive manufacturing plant setups in India. Here are some of the major government policies to encourage new automotive manufacturing plants in India.

  • India is considering revising the import duty structure to incentivize domestic manufacturing.
  • As the need and demand for electric vehicles rise across the globe, India has reduced the GST rate of electric vehicles. Currently, it is 5 % for electric vehicles whereas for other vehicles it is 28% GST.
  • The customs duty structure has also been revised to incentivize local Electric vehicle and battery manufacturing.
  • The government has also promised ambiguity regarding the policy framework for the introduction of hybrid cars.
  • On top of these policies, the government has also cut the corporate tax to 17% to boost investment and transform India into a “manufacturing hub”. 
  • Also, the free flow of goods in and out of the country, simplified customs procedures, a major upgrade of port infrastructure supports the government policies to encourage new setups in India.

Major players in the Automobile industry in India:

  • Tata motor corporation
  • Hyundai motor company
  • Yamaha Motor Co Ltd
  • Honda Motor Co Ltd
  • Suzuki motor corporation
  • Renault
  • Volkswagen Aktiengesellschaft

Thus, with its strong infrastructure, solid government support, and room for more growth, India is projected to become the 3rd largest automotive manufacturer globally by 2025. If you’re planning to move your manufacturing plant from China to India or decided to set up a manufacturing unit in India, as a reliable outsourcing company in India, Isourcing can make the process a whole lot easier. We can support you by doing a market assessment study and evaluation of possible collaborations and entry strategy. With Isourcing, you can effectively minimize the risks and reduce the overall costs involved in setting up the manufacturing unit in India.