India’s Automobile Sector Strengthens on Rising Demand, Exports and Policy Support

The Economic Survey 2025–26 reported that India’s automobile sector continues to expand its contribution to growth, employment and manufacturing. It noted that rising domestic demand, steady export gains and supportive policy measures have reinforced the industry’s position as a key driver of economic activity.

The sector benefits from a large manufacturing and component base, supporting wide‑ranging production capabilities. The Survey highlighted that the sector remains central to employment generation and industrial development.

Domestic Demand and Sector Contribution

The Economic Survey stated that domestic demand has been a key driver of the sector’s growth trajectory. It highlighted that the automobile industry provides direct and indirect employment to over 30 million people across manufacturing, sales and ancillary services.

The Survey added that the industry contributes nearly 15% of the country’s Goods and Services Tax (GST) collections. This reflects the sector’s broad linkages across supply chains and consumer markets.

Production Growth Over the Past Decade

According to the Survey, automobile production rose nearly 33% from FY15 to FY25. It attributed this increase to a strong post‑pandemic recovery in demand, which improved both output and sales.

The Survey reported that production expansion has been sustained by domestic consumption across vehicle categories. Improved manufacturing capacity utilisation also contributed to higher output. This long‑term rise underscores the industry’s resilience over the past decade.

Strong Export Momentum into FY26

The Economic Survey highlighted that exports crossed 5.3 million vehicles in FY25 across passenger, commercial, two‑wheeler and three‑wheeler segments. It noted that the momentum continued into FY26, with double‑digit export growth recorded in the first half of the year.

The Survey attributed this export strength to growing global acceptance of India‑made vehicles. It added that diversified overseas demand has supported output stability.

PLI Scheme Boosts Advanced Automotive Technology

The Survey stated that the Production Linked Incentive (PLI) Scheme for Automobiles and Auto Components, approved in September 2021 with an outlay of ₹25,938 crore, has supported the development of Advanced Automotive Technology (AAT) vehicles and components. It noted that cumulative investment under the scheme reached ₹35,657 crore as of September 2025.

The programme has created 48,974 jobs, reflecting its impact on manufacturing expansion. The PLI framework continues to attract new investment into technology‑driven automotive products.

Read More: India’s EV Sector Maintains 63% CAGR Over 6 Years.

Conclusion

The Economic Survey 2025–26 indicates that India’s automobile sector continues to expand on the back of domestic demand, export growth and targeted policy initiatives. Production has risen significantly over the past decade, supported by manufacturing recovery.

Export growth into FY26 highlights rising global demand for India‑made vehicles. PLI schemes for automotive technologies and battery storage have driven investment and job creation.

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