In the global context, India is the largest tractor manufacturer, the second largest two-wheeler manufacturer, the second-largest bus manufacturer, and the fourth largest car manufacturer, with 5.16% of global car sales. India also exported 7,01,757 passenger vehicles in 2018. However, the bulk of the exports is in compact cars, which constitute only 30% of the global sales volume of cars. The export of large/premium cars (cars other than class A and B with subcompacts, microcars, and superminis), which constitutes 70% of the global sales turnover, is negligible. To achieve higher throughput and sales, India needs to scale up the manufacturing of large and premium cars having a cylinder capacity of 1500 cc and higher.
When benchmarked with China, India is highly inadequate in sales of premium cars. The number of premium cars India sells annually is almost equal to what China sells in a week. Such huge volumes have enabled China to become an export powerhouse and the R&D hub of all major car manufacturers worldwide.

Premium cars involve high input of technology and software, a field where India has a high level of expertise. It is well-positioned to become a center of excellence for manufacturing premium cars. Increasing premium car manufacturing in the country would involve a review of our policies and building an eco-system for this. The tariffs in India are among the highest globally and are skewed against bigger cars. As a result, the premium car segment has the largest tax burden among all cars. A benchmarking of taxation in India compared to China, Mexico, Thailand, and Brazil, reveals that the taxes are the highest in India.

The Government of India has been taking proactive steps to develop a progressive automotive environment. The Automotive Mission Plan, the ‘Make in India’ and the new National Auto Policy are a few initiatives that have drawn the attention of global experts. The automotive sector contributes 7.1% to India’s GDP, compared to 14% in developed countries like Germany, and employs approximately 40 million people through its eco-system. This sector needs special attention from the policymakers and government to be able to achieve its full potential and reach the next level of growth.

This research report focuses on the large/ premium cars segment, contributes to approximately 70% of global sales turnover.
We have evaluated the market dynamics of premium cars in the country, studied the domestic penetration and export potential of premium cars, analyzed the government policy towards premium cars, and recommended measures to enhance the manufacturing of premium cars in India. The study involved primary and secondary research to understand the premium car market in India. We submitted our research report to the donor and, based on our insights, contributed a chapter to NITI Aayog’s India Manufacturing @2035.