India’s automobile industry continues to strengthen its position as a key pillar of economic growth, with rising exports, robust production expansion and sustained policy support reinforcing its global competitiveness, according to the Economic Survey 2025–26 tabled in Parliament on Thursday.
The Survey said India has emerged as the world’s largest market for two-wheelers and three-wheelers, and the third-largest globally for passenger and commercial vehicles combined. Backed by a strong manufacturing base and an extensive auto component ecosystem, the sector employs more than 30 million people directly and indirectly and contributes nearly 15 per cent of the country’s total GST collections.
Exports reflect growing global acceptance
India’s automobile exports increasingly reflect the growing acceptance of vehicles manufactured in the country across global markets. The industry exported more than 5.3 million vehicles across passenger vehicles, commercial vehicles, two-wheelers and three-wheelers in FY25, and recorded double-digit export growth in the first half of FY26.
This trend underscores India’s rising stature as a global automotive manufacturing hub, supported by competitive costs, expanding production capacities and improving quality standards.
Production growth driven by demand recovery
The Survey attributed the industry’s growth to a strong demand-side recovery in the post-pandemic period, which has supported higher production and domestic sales. Over the past decade, vehicle production rose by nearly 33 per cent between FY15 and FY25, highlighting sustained expansion across segments.
Policy interventions have played a critical role in strengthening the sector, particularly in electric mobility. Government initiatives such as the Production-Linked Incentive (PLI) scheme for automobiles and auto components, the PLI scheme for advanced chemistry cell battery storage, PM E-DRIVE and the PM e-Bus Sewa Payment Security Mechanism have accelerated electric vehicle adoption and strengthened the domestic EV ecosystem.
The Scheme to Promote Manufacturing of Electric Passenger Cars in India (SMEC), notified in March 2024, is also helping attract global investments and position India as a manufacturing destination for electric cars, the Survey noted.
GST reforms to boost demand and manufacturing
The Survey highlighted the impact of tax reforms on the automotive sector. GST on small cars, motorcycles up to 350 cc and three-wheelers has been reduced to 18 per cent from 28 per cent. Buses, trucks and ambulances have also been brought under the 18 per cent slab. A uniform 18 per cent GST rate on auto parts has been introduced, while luxury cars and motorcycles above 350 cc are taxed at 40 per cent, with cess on luxury cars removed.
The Survey said these targeted GST rate reductions are expected to boost demand, improve trade competitiveness and strengthen India’s automotive manufacturing base.
Overall, the Economic Survey 2026 underlined that the automobile industry remains a key driver of India’s economic transformation, with structural reforms, rising exports and rapid electrification expected to shape the sector’s next phase of growth.
