India’s Automotive Sector: Growth Against Global Headwinds

What’s Driving India’s Growth While Global Markets Contract?

Global automotive production stagnated in 2024, with worldwide output slipping by 1% to 92.5 million vehicles [1]. Major markets faced contraction: USA (-12%), Japan (-9%), Germany (-1%), and Thailand (-20%) [2]. Europe’s car production fell 6.2%, and North America dropped 3.2%, reflecting the impact of high interest rates, EV subsidy cuts, and geopolitical uncertainty [3].

India stands out as an exception. In 2024, India produced around 6 million vehicles, marking a 3% year-on-year increase—its highest-ever output [4]. Passenger vehicle sales surged to 4.27 million units (+4.2%), while two-wheelers grew 14.5%, and automotive exports rose 14% in the first half of FY2025 [5].

This growth is fueled by strong domestic demand, rising exports to emerging markets, and government-backed incentives such as the Production Linked Incentive (PLI) and FAME II schemes [6].

Policy Catalysts: How Incentives Are Shaping India’s Automotive Future

• PLI Scheme: Attracting foreign investment into EV and component manufacturing.

• FAME II: Accelerating EV adoption through subsidies and charging infrastructure.

• Export Push: OEMs leveraging India as a cost-competitive base for emerging markets.

While India ranks fourth globally in total vehicle production—behind China (31.3M), USA (10.6M), and Japan (8.2M) [7]—it remains the third-largest car market by sales, signaling resilience and strategic importance amid a global slowdown [8].

The Hidden Risks Behind the Growth

Rapid expansion masks structural vulnerabilities. The question is not whether disruption will occur—but when. The Nexperia crisis in 2025, which halted production at Volkswagen and Honda and caused an estimated €295M in losses within 10 days, is a stark reminder: 40% of global automotive semiconductors came from one supplier [9]. When geopolitics intervened, entire supply chains collapsed.

India’s automotive ecosystem is not immune. Semiconductor dependency, shrinking component lifecycles, and logistics bottlenecks create systemic risk.

Is the industry equipped to handle disruptions and maintain a competitive edge?

Industry Pain Points: Where Disruption Hits Hardest

1. Supply Chain Volatility & Component Shortages

• Semiconductor shortages continue to disrupt production schedules, leading to significant delays in vehicle delivery.

• Global trade uncertainties (geopolitical tensions, export restrictions, and pandemic aftershocks) introduce unpredictability in sourcing critical components.

• Logistics bottlenecks drive up transportation costs and extend lead times, increasing the risk of stock-outs.

2. Market Competition & Shifting Consumer Preferences

• Mahindra’s dominance in the SUV market is under pressure, with Tata and Hyundai launching competing models with shorter lead times and enhanced technology features.

• Consumer demand for electric and hybrid vehicles is accelerating, but delays in component availability slow down product launches.

• Waiting periods for Mahindra vehicles create an opportunity for competitors to capture market share, especially in the fast-moving mid-size SUV and EV segments.

3. Rising Costs & Declining Margins

• Raw material costs have surged by 8.7% (between 2020 and 2022), putting additional pressure on manufacturing expenses [10].

• Profit margins have declined by 35%, making it harder for manufacturers to absorb unexpected supply chain disruptions [10].

• Manual inefficiencies in procurement and inventory management increase costs, leading to unoptimized inventory and capital being tied up in Last Time Buy (LTB) stock.

4. Shrinking Component Lifecycles & Obsolescence Risks

• The lifecycle of electronic components has dropped from 30 years to less than 4 years, making long-term planning more challenging [11,12].

• 7.5x increase in stock-out risks, leading to unplanned production halts and financial penalties from missed deliveries.

• 7.5x more redesign projects, requiring engineering resources to update vehicle systems that rely on outdated or unavailable components instead of focusing on innovation.

What Can Automotive Leaders Do?

The Indian automotive sector must shift from a reactive to a strategic approach in managing obsolescence, geopolitic & supply chain risk, ESG & compliance and product lifecycle planning. Addressing these challenges requires:

1. Strengthening Supply Chain Resilience

• Predictive supply chain analytics to identify component risks such as geopolitical, compliance, and inventory, before they lead to shortages.

• Risk-based safety stock strategies that ensure availability without excessive overstocking.

• Supplier risk assessments to evaluate potential disruptions from geopolitical factors and trade regulations.

2. Proactively Managing Product Lifecycles

• Automating lifecycle tracking to monitor component health and prevent last-minute redesigns.

• Streamlining redesign efforts by consolidating obsolescence-related updates into a single, planned initiative rather than scattered firefighting efforts.

• Data-driven decision-making for selecting long-life, stable components during the design phase, reducing future rework costs.

3. Optimizing Costs & Reducing Waste

• Strategic procurement planning to ensure cost-effective sourcing of materials, minimizing financial exposure to price hikes.

• Optimizing Last Time Buy inventory to prevent unnecessary stockpiling and capital lock-in.

• Digitizing procurement processes to reduce inefficiencies and improve negotiation power with suppliers.

What Financial Impact Can Be Expected?

By integrating strategic supply chain risk management and obsolescence planning, automotive manufacturers can achieve tangible financial benefits:

Challenge	Strategy	Potential Outcome
Stockouts & Production Delays	AI-driven risk mitigation, alternative sourcing strategies	Reduced production stoppages @$2M/hr. avoiding lost revenue and fines from delayed deliveries
Shrinking Profit Margins	Cost-optimized procurement, supplier risk assessment	Minimized cost fluctuations and improved cost predictability increase margins by 40%
Tied-Up Inventory Capital	Smart LTB planning & inventory management	More efficient capital allocation, reducing excess stockholding
Frequent Redesign Projects	Lifecycle monitoring & predictive obsolescence planning	85% fewer redesigns @$30K to $33M, reducing engineering costs and unplanned expenses, freeing innovation resources, avoiding market share losses

Beyond Nexperia: Preparing for the Next Supply Chain Shock

India’s growth story is compelling—but fragile. Semiconductor dependency, regulatory shifts, and geopolitical fragmentation mean the next disruption could be bigger than Nexperia. OEMs that embed resilience into design, sourcing, and lifecycle planning will not just survive—they will lead.

Future-Proofing Automotive: From Risk to Resilience

The Indian automotive sector is at a tipping point. Growth is strong—but so are the risks. The next supply chain disruption won’t send a calendar invite. Component shortages, price surges, redesign backlogs—they arrive without warning and compound quickly.

The companies that stay competitive will be those that plan today for what will go wrong tomorrow.

Have you mapped the lifecycle of your most critical components? Are redesigns draining innovation resources? Is your inventory working for you—or tying up capital unnecessarily? These are the questions that need answering now.

At Horlebein Consulting, we don’t sell software. We build strategies grounded in data, around people and culture, industry context, and actionable insights. Together, we can reduce redesigns, reclaim tied-up capital, and protect production—before the next shock hits.

Let’s talk about how to turn your existing risks into resilience and competitive advantage.

[1] OICA Global Production Data

[2] CEIC Data, Global Automotive Trends

[3] ACEA European Automobile Manufacturers Association

[4] SIAM (Society of Indian Automobile Manufacturers)

[5] Statista, India Automotive Market FY2024

[6] Government of India – PLI & FAME II Scheme Reports

[7] OICA Country Rankings 2024

[8] IHS Markit Automotive Market Analysis

[9] Z2Data

[10] ConsumerAffairs

[11] Accuris (formerly IHS Markit)

[12] SiliconExpert