India’s car market, third-largest in world, gets a boost: Suzuki to invest $8 bn over next 5-6 years

Suzuki Motor, Japan’s largest carmaker by volume, announced plans to invest Rs 70,000 crore (about $8 billion) in India over the next five to six years.

According to Reuters, company chairman Toshihiro Suzuki explained that this investment would underpin the firm’s strategy to retain its lead in India, which has become the world’s third-largest car market and Suzuki’s single biggest market by both sales and revenue.

The announcement coincided with the start of production of Suzuki’s first electric vehicle in India, marking what industry analysts described as a significant step in the company’s global electrification drive.

The mid-sized “e Vitara” SUV rolled off the line at the Gujarat plant in Hansalpur, which was projected to become one of the world’s largest automobile hubs with a capacity of one million units annually.

India as a global EV hub

Company executives told Reuters that India would be positioned as Suzuki’s worldwide production base for electric vehicles, with exports targeted to around 100 countries, including Japan and European markets. This decision appeared notable because it came despite the slowdown in global EV sales, hinting at Suzuki’s long-term confidence in India’s cost competitiveness and manufacturing ecosystem.

The Indian government has been pushing hard for the country to emerge as a global hub for EV manufacturing. Prime Minister Narendra Modi, who attended the plant’s inauguration, described the launch as a “big leap” towards the ‘Make in India’ initiative, which seeks to anchor global supply chains in the country.

PM Modi pointed to Maruti Suzuki as an example of the strong business and cultural ties between India and Japan, and he encouraged citizens to buy products manufactured in India regardless of where the investment originated.

India’s expanding auto market

Industry data showed that India had overtaken Japan in 2024 to become the third-largest car market after China and the United States. Passenger car sales touched 4.3 million units, with SUVs making up nearly two-thirds of that figure. Two-wheelers, a segment crucial to India’s mobility landscape, crossed 19.5 million units, while commercial vehicles reached nearly one million, CarToq reported.

The auto sector already accounted for close to half of India’s manufacturing GDP and about 7 per cent of the overall economy, highlighting its central role in employment and industrial growth.

Union Transport Minister Nitin Gadkari recently suggested that India could become the world’s largest automobile industry within five years, surpassing both the US and China. He highlighted that when he assumed office in 2014, the industry’s value stood at Rs7.5 lakh crore, while it now hovered around Rs22 lakh crore.

The EV challenge

While India’s electric vehicle market has been growing, it remains small compared with China. Chinese companies accounted for more than half of global EV sales in 2023, producing over 9 million electric cars, while also dominating the global battery supply chain through integrated mining, refining and cell production.

By contrast, India’s EV penetration in passenger cars remained in the single digits with sales measured in the hundreds of thousands. The country still relied heavily on imported cells and components, which kept costs higher than competitors in China.

Government initiatives such as the FAME-II subsidy scheme and the Production Linked Incentive (PLI) programme for advanced batteries have aimed to close this gap.

Opportunities and constraints

India’s long-term growth prospects in the automobile sector remained strong. Projections suggested that GDP would grow around six per cent annually through the next decade, with per capita incomes nearly doubling by 2035.

Passenger vehicle penetration, currently at 44 vehicles per 1,000 adults, was expected to rise steadily with urbanisation and income growth, CarToq reported.

A realistic growth path

While India’s aim to overtake the US and China in five years appears challenging, the current trajectory still positioned it as one of the fastest-growing auto markets in the world. With sustained annual growth in the 10–15 per cent range, the country could expand capacity, deepen localisation and build leadership in electric and connected mobility technologies.

In that sense, Suzuki’s $8 billion commitment was not just an investment in EVs but also a signal that multinational companies continued to view India as central to the global auto industry’s future. For India, this development reinforced its role as both a large consumer market and an increasingly significant global manufacturing hub.