India's Car Sales to Grow 3.5% Annually Till 2030: Moody's A key factor driving this growth is India's relatively low vehicle penetration: just 44 cars per 1,000 people

India is set to remain a critical pillar of global automakers' strategies over the next decade, powered by a youthful workforce and growing income levels, according to a report released Tuesday by Moody's. The global credit agency underscored that while India's transition to electric vehicles (EVs) is underway, the shift will be gradual due to infrastructure shortcomings and supply chain constraints.

"India's car sales are expected to grow at a compound annual growth rate of 3.5 per cent—the highest in Asia—reaching around 5.1 million units by 2030," the report stated. A key factor driving this growth is India's relatively low vehicle penetration: just 44 cars per 1,000 people. Despite that, India already ranks as the third-largest auto market in the world by unit sales.

The competitive landscape in India remains intense. While homegrown manufacturers account for about a quarter of total car sales, more than 70 per cent of the market is dominated by Japanese, Korean, and Chinese automakers, many operating through joint ventures or subsidiaries. These players benefit from their extensive global product portfolios and established manufacturing capabilities.

Trade dynamics are also shifting. Moody's noted that India's ongoing trade talks and its recent agreement with the UK signal mounting pressure to liberalize a market long shielded by steep import tariffs. This could open new opportunities, and challenges, for both domestic and international players.

On the electrification front, progress is steady but far from rapid. Tata Motors and Hyundai are prioritizing battery electric vehicles, while Honda plans to ease in with plug-in hybrids. Automakers are expected to invest over $10 billion through 2030 to secure a competitive edge in the EV sector. However, these capital commitments are likely to strain their cash flows.

"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 emphasized.

Even as global carmakers accelerate EV rollouts in China, Europe, and the US to meet emission targets, India's conventional vehicle market remains indispensable. Besides serving local demand, the country also functions as a vital export hub, reinforcing its strategic role in global automotive operations.

While EVs may struggle to reach profitability in many regions, Moody's concluded that India's demographic advantage and growing consumption will continue to fuel long-term demand for traditional vehicles.