India is fast becoming a central pillar in the China+1 auto strategy adopted by global automotive manufacturers, according to a joint report by EY and Parthenon. This shift comes as companies seek to diversify supply chains and reduce overdependence on China amid geopolitical tensions, rising costs, and the need for supply stability.
The report highlights that India’s low manufacturing costs and government-backed incentives, especially the Production-Linked Incentive (PLI) Scheme, are attracting global original equipment manufacturers (OEMs). The PLI scheme, with a $3 billion budget, offers 8–18% sales-linked incentives for advanced and electric vehicle components. This has already spurred auto component exports worth $61.8 billion.
The China+1 strategy—where companies establish production bases in countries other than China—has made India a preferred sourcing hub for auto components. Its political stability, large consumer base, skilled workforce, and rising income levels further strengthen its appeal.
Industry experts caution, however, that success will require investment in research and development to move beyond replicating Chinese manufacturing capabilities. Former NITI Aayog CEO Amitabh Kant urged companies to “leapfrog” technologically rather than simply import from China, while Chief Economic Adviser Anantha Nageswaran called India one of the best destinations for manufacturing investment.
With strong policy support and global demand for diversified supply chains, India is poised to cement its role as a key player in the global auto manufacturing landscape.
