India's auto market stays hot for global carmakers despite sluggish EV transition: Moody's
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India's booming automotive sector continues to lure global and domestic carmakers, even as the country trails in electric vehicle (EV) adoption due to inadequate infrastructure, according to a new report from Moody's Ratings on Tuesday. The report cites India's demographic edge, characterised by a rising working-age population and growing incomes, as a major force behind the sustained surge in car sales.Despite slow progress on electrification, the Indian auto market remains an attractive proposition for global players, bolstered by its status as the third-largest car market globally by unit sales and a notably low car penetration rate, just 44 cars per 1,000 people. Moody's forecasts that India's passenger vehicle sales will grow at a compound annual growth rate (CAGR) of 3.5% through 2030, reaching approximately 5.1 million units, the fastest growth rate in Asia.India's historically protectionist stance, marked by high import tariffs, has long shielded domestic players and forced foreign companies to manufacture locally, the report said. However, Moody's points to growing external pressure for liberalisation, citing ongoing trade talks and a recently concluded agreement with the UK as signs of a gradual opening up of India's auto market.The competitive landscape is already intense. While domestic automakers account for about a quarter of total car sales, foreign players, primarily from Japan, South Korea, and China, dominate the rest of the market, often through subsidiaries or joint ventures. Their ability to deploy a broad global product lineup gives them a strong edge in India's price-sensitive market.Electrification, however, is still in its early days. Companies such as Tata Motors and Hyundai Motor Group's Indian arm are betting big on battery electric vehicles (BEVs), while Honda is pursuing a phased approach, starting with plug-in hybrids. Moody's notes that leading carmakers plan to invest over $10 billion in India through 2030 to enhance competitiveness. However, such investments are expected to strain free cash flows.'The pace of BEV adoption in India hinges on the development of a robust ecosystem, including nationwide charging infrastructure and a reliable domestic battery supply chain,' the report says. Localised production will be key to reducing costs and making EVs more affordable to Indian consumers.Global auto companies are under mounting pressure to decarbonise their fleets, particularly in China, Europe and the US. But with EV profitability still limited due to high battery costs and modest sales volumes, India's fast-growing market for internal combustion engine (ICE) vehicles is expected to remain a strategic priority.India is also likely to retain its role as a manufacturing and export hub for several global automakers, Moody's notes, further highlighting the country's importance in the global automotive landscape.
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