India's Auto Market Remains A Global Priority Despite Slow EV Transition: Moody’s

The report projected a compound annual growth rate (CAGR) of 3.5 per cent for car sales in India, the fastest pace in Asia. By 2030, vehicle sales are anticipated to reach 5.1 million units.

Although carmakers are accelerating EV production in key markets such as China, Europe, and the US to meet emission norms, India remains strategically important due to its promising internal combustion engine market and role as an export hub.

Source : Freepik

India is poised to remain a crucial part of global automakers’ long-term growth strategies, thanks to its expanding working-age population and rising income levels, according to a recent Moody’s Ratings report.

However, while the country's traditional vehicle market presents vast opportunities, its electric vehicle (EV) transition is expected to unfold gradually due to multiple structural challenges, reported Business Standard.

The report projected a compound annual growth rate (CAGR) of 3.5 per cent for car sales in India, the fastest pace in Asia. By 2030, vehicle sales are anticipated to reach 5.1 million units. “A low car penetration rate of only 44 cars per 1,000 people underlines the significant growth potential in India, which is already the world’s third-largest auto market by unit sales,” the report highlighted.

Fierce Competition and Expanding Global Interest

India’s automotive landscape is marked by intense competition and a broad mix of players. Domestic manufacturers currently represent around a quarter of total car sales, while international brands—particularly those from Japan, Korea, and China—hold more than 70 per cent of the market. Many of these foreign players operate through joint ventures or local subsidiaries, using their global portfolios to meet local preferences and price points.

Moody’s also pointed out that India's evolving trade policy and its recent agreement with the UK could further open the local market to international players. Historically, high import tariffs have shielded domestic production, but future trade developments may introduce greater foreign competition.

EV Ambitions Hampered by Ecosystem Challenges

While interest in EVs is building, the report emphasised that India’s electric vehicle journey remains at a nascent stage. Tata Motors and Hyundai have centred their efforts on battery electric vehicles, while Honda plans to roll out plug-in hybrids. Despite ambitious plans, infrastructure deficits—especially in nationwide charging networks—and limited domestic battery manufacturing continue to slow progress.

Automakers are expected to invest over $10 billion by 2030 to enhance their competitiveness in the EV space. These capital expenditures, however, are likely to exert pressure on company cash flows in the short term. “The pace of battery electric vehicle adoption hinges on the development of a robust ecosystem, including nationwide charging infrastructure and reliable domestic battery supply chains,” Moody’s said.

Strategic Role Amid Global Electrification Push

Although carmakers are accelerating EV production in key markets such as China, Europe, and the US to meet emission norms, India remains strategically important due to its promising internal combustion engine market and role as an export hub. This dual position strengthens the country's relevance, even as EV uptake lags.

Moody’s further noted that EV-related profitability will remain constrained across several regions, but India’s demographic advantage and rising consumer demand are expected to support continued growth in conventional vehicle sales.