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NITI Aayog Report Flags Concerns for India's Automotive Sector

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  Published in Automotive and Transportation on Wednesday, January 7th 2026 at 6:00 GMT by ThePrint

India's Automotive Sector Needs a Jumpstart: NITI Aayog Flags Export Concerns & Domestic Sluggishness

A recent report by NITI Aayog highlights growing concerns regarding India’s automotive sector, pinpointing a sluggish export performance alongside persistent domestic demand issues. The analysis, detailed in ThePrint, suggests that while India aspires to become a global automotive manufacturing hub, current trends risk hindering this ambition. The report doesn't point to a crisis, but a worrying deceleration requiring proactive intervention to regain momentum.

The Export Problem: A Dip in Key Markets & Competitive Pressure

The core of NITI Aayog’s concern lies in the declining export performance of the Indian automotive industry. Traditionally, India has been a relatively strong exporter of vehicles, particularly to emerging markets. However, recent data reveals a contraction in key export destinations. The report specifically points to a fall in exports to regions like Latin America, Africa, and the Middle East.

The reasons for this decline are multifaceted. Increased competition from countries like China, Thailand, and even Mexico is a significant factor. These nations benefit from established supply chains, economies of scale, and, in some cases, preferential trade agreements. While India boasts a skilled workforce and growing manufacturing capacity, it struggles to match the cost competitiveness and logistical efficiency of its rivals.

The NITI Aayog report links this to a lack of focus on developing specific niches and product categories for export. Historically, India has concentrated on smaller, more affordable vehicles. While this approach served well in price-sensitive markets, it leaves India vulnerable to competition from manufacturers offering more sophisticated and technologically advanced vehicles. Furthermore, the increasing trend towards Electric Vehicles (EVs) globally presents a challenge. India's EV export market is currently nascent, and the country needs to rapidly develop its capabilities in this area to avoid being left behind.

Domestic Demand: Lingering Effects of Pandemic & Economic Slowdown

The report doesn't solely focus on exports, however. It acknowledges persistent challenges in boosting domestic demand for automobiles. While the Indian car market is one of the fastest growing globally, it's also characterized by cyclical downturns and sensitivity to economic conditions. The lingering effects of the Covid-19 pandemic, coupled with broader economic slowdown and inflationary pressures, have dampened consumer sentiment.

High vehicle prices, fuelled by rising input costs and a shift towards more sophisticated (and expensive) features, also contribute to the slowdown. This is particularly true for two-wheelers, which traditionally constitute a large share of vehicle sales in India. The increase in financing costs, due to rising interest rates, adds another layer of complexity.

ThePrint article notes the impact of BS-VI emission norms transition, which, while environmentally beneficial, also increased vehicle costs. While these costs were initially expected to be absorbed by manufacturers, a portion has inevitably been passed on to consumers.

NITI Aayog’s Recommendations: A Multi-Pronged Approach

To address these challenges, the NITI Aayog report proposes a comprehensive strategy centered around several key pillars:

• Boosting Export Competitiveness: This includes streamlining export procedures, reducing logistics costs, and actively pursuing free trade agreements (FTAs) with key target markets. The report emphasizes the need to move beyond simply competing on price and to focus on developing specialized vehicles and components with higher value addition. It suggests identifying and prioritizing specific regional markets based on demand and competitive landscape.
• Strengthening Domestic Demand: The report advocates for policies that stimulate domestic consumption, such as scrappage policies for older vehicles (encouraging replacement with newer, more efficient models), tax incentives for EV purchases, and infrastructure development to improve connectivity and reduce transportation costs. The Production Linked Incentive (PLI) scheme, already in place, is viewed positively but needs to be scaled up and refined to attract further investment.
• Promoting Technological Advancement & Innovation: The NITI Aayog stresses the importance of investing in research and development (R&D) to foster innovation in areas like EVs, autonomous driving, and connected car technologies. This includes encouraging collaborations between automakers, research institutions, and startups. Government support for skill development is also crucial to ensure a workforce capable of handling the complexities of modern automotive manufacturing.
• Supply Chain Resilience: The report highlights the need to build a more resilient and localized supply chain, reducing dependence on imports of critical components. This aligns with the government’s ‘Atmanirbhar Bharat’ (Self-Reliant India) initiative. Strengthening the domestic component manufacturing ecosystem is seen as vital for both export competitiveness and supply chain security.
• Focus on Electric Vehicles: Recognizing the global shift towards EVs, the NITI Aayog emphasizes the need to accelerate the adoption of EVs in India. This requires investments in charging infrastructure, battery manufacturing, and the development of a robust EV ecosystem. Policies promoting local battery production are deemed critical.

Looking Ahead:

The NITI Aayog report serves as a crucial wake-up call for the Indian automotive industry and policymakers. While India possesses significant potential to become a major automotive hub, realizing this potential requires proactive intervention and a long-term strategic vision. Ignoring the warning signs of slowing exports and sluggish domestic demand could jeopardize the sector’s growth trajectory and hinder India’s aspirations to become a global manufacturing powerhouse. The report suggests that a coordinated effort involving government, industry, and academia is essential to jumpstart the automotive market and ensure its sustainable growth in the years to come.