The rapid evolution of India’s automotive landscape is propelling global car manufacturers to transform the nation into a significant export hub. With the demand for upscale vehicles surging among wealthier drivers, India’s domestically produced cars are gaining international competitiveness.

Surpassing Japan, India has secured the position of the world’s third-largest car market, trailing only behind the United States and China. In the last fiscal year, auto exports surged by 14%, totaling 662,891 units. While this figure still trails Japan’s 3.37 million cars for the same period, automakers recognize the potential for further expansion in India’s market.

As disposable incomes rise, Indian consumers are gravitating towards higher-priced sport utility vehicles (SUVs) and sedans over hatchbacks. Responding to this shift, global car manufacturers are designing vehicles tailored to India’s preferences, aiming to introduce them to other markets as well.

Frank Torres, president of Nissan India, explains the brand’s approach: “Nissan wants to use India as a big hub for exports.” Nissan currently exports the Magnite SUV, initially launched in India in late 2020, to 15 nations across South Asia, Southeast Asia, and Africa. The company plans to expand exports of left-hand drive versions of the SUV to the Middle East and Latin America.

Piyush Arora, Managing Director and CEO of Skoda Auto Volkswagen, highlights India’s cost advantage: “I definitely believe that we have a cost advantage for the domestic market, and it translates into a cost advantage for exports as well. The strength of India’s low-cost manufacturing possibilities is definitely utilized.”

Moreover, India boasts a robust network of local component suppliers and affordable labor, contributing to the attractiveness of an export-focused approach. The growth of India’s auto parts sector by approximately 33% in fiscal 2023, reaching about $70 billion, further highlights the country’s potential.

The shift towards exports is particularly crucial for global automakers striving to compete with local giants like Maruti Suzuki, Tata Motors, and the Mahindra Group. V.G. Ramakrishnan, Managing Partner at consultancy Avanteum Advisors, explains the strategy: “They [global carmakers] realized that if they wanted to compete with Maruti, they had to get the pricing right. And for them to get the pricing right, they had to get the volume right.”

As the Indian market continues to grow and evolve, both domestic and international automakers are capitalizing on the country’s potential as an export hub, utilizing its manufacturing capabilities and responding to the shifting consumer preferences.