India to remain central to global automakers’ strategies in coming years: Moody’s Ratings

Moody’s Ratings on Tuesday said that India will remain central to global automakers’ strategies in the coming years, driven by a young and growing working-age population and rising incomes.

However, the global credit ratings agency also noted that India’s transition to electric vehicles (EVs) will be gradual, with infrastructure gaps and supply chain hurdles slowing adoption.

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Moody’s Ratings in a new report expected India’s car sales to grow at a compound annual growth rate of 3.5%. This will be the highest in Asia reaching around 5.1 million units by 2030.

“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.

Amid strong demand, India’s shift to EVs remains in early stages, with Tata Motors and Hyundai focusing on battery electric vehicles, while Honda plans to start with plug-in hybrids.

The report said automakers are expected to invest over $10 billion through 2030 to build competitiveness in the EV segment, though these investments will weigh on their free cash flows.

Moody’s observed that India’s trade negotiations and a recent trade deal with the UK signal growing pressure to open up the domestic market, traditionally protected by high import tariffs.

Automakers are under pressure to electrify their line-ups in China, Europe and the US to meet emission targets, but India’s high-growth conventional vehicle market remains a critical focus for global players. India also serves as an export base for some automakers, reinforcing its strategic importance despite the slow local EV adoption.