Indian Automobile Sector Shows Export Growth With Falling Imports: Economic Survey 2025-26

The Indian automobile sector export growth highlighted in the Economic Survey 2025-26 reflects a rare and favorable trade pattern, combining sustained export expansion with declining imports. The Survey interprets this trend as evidence of maturing domestic manufacturing capability, especially significant amid challenging global trade conditions.
Released on January 28, the Economic Survey examined trade performance across 14 Production-Linked Incentive sectors using data from FY21 to FY25. While overall PLI exports grew at an average annual rate of 10.6% and imports at 12.6%, sector-level outcomes varied widely, making automobiles a notable outperformer.
Automobile Sector in the PLI Trade Performance Matrix
The Survey categorizes PLI sectors using a four-quadrant matrix based on export and import growth. In this framework, the automobile sector appears in the most favorable quadrant, marked by positive export growth alongside negative import growth.
This positioning is particularly noteworthy because India continues to face an effective export tariff rate of 50 percent on goods exported to the United States due to reciprocal and penal duties. Despite this, automotive exports have maintained momentum, suggesting competitiveness rooted in cost, quality, and supply chain depth rather than tariff advantages.
Other PLI sectors show contrasting patterns. Electronics recorded strong export growth of 38.8 percent but also saw imports rise by 17.6 percent, pointing to continued dependence on imported components. Solar PV exports grew 23.9 percent while imports surged 155.4 percent, indicating assembly-heavy expansion. ACC batteries posted 45 percent export growth with imports rising 24.9 percent, consistent with a scaling phase reliant on imported inputs.
By contrast, the automobile sector demonstrates declining imports even as exports grow. The Survey groups automobiles with telecom equipment and bulk drugs in this favorable category, suggesting these sectors have moved beyond heavy reliance on imported intermediate goods.
Evidence of Import Substitution and Supply Chain Depth
The combination of export growth and falling imports implies genuine import substitution. Domestic manufacturers are not only supplying overseas markets but are also replacing imported vehicles and components within India.
The Survey describes India’s automotive ecosystem as vast, supporting direct and indirect employment for over 30 million people. This depth gives the sector an advantage in localizing production compared to newer PLI sectors still building supplier networks.
Under the PLI-Auto scheme approved in September 2021, the sector has attracted cumulative investment of ₹35,657 crore up to September 2025, exceeding the original outlay of ₹25,938 crore. The trade data indicates that this investment is translating into export-oriented manufacturing with reduced import dependence rather than expanded assembly of imported parts.
Export Performance Across Vehicle Segments
The Survey notes that more than 5.3 million vehicles were exported in FY25 across passenger vehicles, commercial vehicles, two-wheelers, and three-wheelers. Export volumes continued to record double-digit growth in the first half of FY26, reflecting rising global acceptance of India-made vehicles.
Two-wheelers stand out for brand-led success. Indian manufacturers have gained significant market share in South America and Africa under their own brand names, displacing Chinese competitors on quality and undercutting Japanese brands on price. This reflects genuine international brand competitiveness.
Passenger vehicle exports show a different pattern. Indian brands have had limited success abroad, but foreign-branded vehicles manufactured in India have performed well in markets such as Japan and Europe. This indicates world-class manufacturing capability and quality standards, even if Indian passenger vehicle brands lack global recognition.
Comparison With Other PLI Sectors
The Survey highlights that sectors starting from a low manufacturing base, such as electronics and solar PV, tend to show high export growth accompanied by rising imports as they integrate into global value chains. In contrast, sectors with established domestic capabilities, including automobiles, telecom equipment, and bulk drugs, demonstrate more balanced growth with declining imports.
Some sectors, including white goods and drones, show declining exports alongside rising imports, indicating competitiveness challenges despite PLI support. This contrast underscores the relative success of the automobile sector within the broader PLI framework.
Transition Risks and Open Questions
While the current trade pattern is favorable, sustainability remains a key question as the industry transitions toward electric vehicles and advanced technologies. EV-related PLI schemes, particularly for ACC batteries, currently show high import growth alongside exports, suggesting an interim phase of import dependence before deeper localization is achieved.
The Survey does not provide data on the import content of exported vehicles, leaving open questions about value capture. Certain high-end electronics and specialized components may continue to be imported even as finished vehicle imports decline.
It is also difficult to isolate the precise impact of the PLI scheme, as automotive exports have been rising for over a decade due to competitive manufacturing costs, quality improvements, and OEM strategies beyond policy incentives.
Outlook for Policymakers and Industry
Maintaining the favorable trade pattern will require continued investment in domestic supply chains, technology absorption, adherence to global quality standards, and cost competitiveness. The Survey’s emphasis on MSMEs, which account for 35.4 percent of manufacturing output, is particularly relevant given their role in tier-2 and tier-3 automotive supply networks.
Despite external headwinds such as tariff uncertainties and global competition, the automobile sector’s ability to sustain export growth under a 50 percent effective US tariff underscores its resilience. For policymakers, the sector represents one of the clearer successes of the PLI approach. For industry players, the data signals that localization and supply chain investments are delivering measurable trade outcomes.