The core story: output, firm health and investment all pointing the same way
Automotive and Transport Equipment is not just growing by the raw counts, it is growing on nearly every measure at once. Factories rose from 8,178 to 8,869 (2014-15 to 2023-24), persons engaged from 11.95 lakh to 17.88 lakh, and GVO from ₹6.17 lakh crore to ₹16.27 lakh crore, a 163.5% increase, national ASI totals. Financial performance of tracked firms has improved just as sharply: PAT margin rose from 2.6% (2014-15) to 7.2% (2024-25), ROE from 7.3% to 17.5%, ROCE from 12.4% to 19.9%, and debt-to-equity fell from 0.62x to 0.24x. Firms remain highly competitive (HHI 208.4, competitive band), with the top-3 firms' combined share essentially flat over the decade at 18.3% in 2024-25 against 18.7% in 2014-15.
The IIP tells the same story from a different angle. Automotive and Transport Equipment fell 30.7 index points in the COVID year, the sharpest shock among comparably-sized sectors, but has recovered further and faster than almost any other sector on record: the index now sits at an all-time high of 157.8, roughly 22% above its pre-COVID peak, with the single fastest latest-year growth rate (11.8%) of the sectors in this series. The Institute attributes this to EV adoption, a nationwide rail and metro rolling-stock build-out, defence indigenisation shifting military orders to domestic manufacturers, and record public infrastructure capital expenditure, structural tailwinds rather than a one-off bounce.
Trade: a volatile but currently healthy surplus
Automotive and Transport Equipment runs a trade surplus (₹65,139 crore in FY24-25) but, unlike sectors with a steady one-directional balance, this one swings: the sector ran small deficits in 2019-20 and 2022-23 before this year's surplus. Exports are growing faster than imports in the latest year (24.7% vs 12.0% YoY, and 12.3% vs 7.4% on a five-year CAGR basis), a healthier trade posture than sectors where imports are outpacing exports. The largest single product line on both sides of the ledger is large aircraft, which mostly reflects airline fleet purchases rather than domestic manufacturing content, worth discounting when reading the trade figures as a pure manufacturing-capability signal. Firm-level financials tell a more cautious story: aggregate Net Forex was negative in 2024-25 and in 8 of the last 11 years, reflecting royalty payments, capital-goods imports and profit repatriation that sit outside the customs-based trade figure.
Investment: private-sector-led, with PLI still in its early disbursement years
New investment is overwhelmingly private, Indian Private Sector investment reached ₹1,23,559 crore in 2024-25 against a combined government share under 3%, with Foreign Private investment a meaningful ₹40,233 crore. Completed-project value jumped roughly 14-fold in the latest year (₹5,556 crore to ₹76,619 crore) on only a modest rise in project count, meaning a handful of very large projects landed rather than a broad-based completion wave. The PLI scheme for Automobile and Auto Components carries a total approved outlay of ₹25,938 crore running to FY2027-28, but actual disbursement remains a small fraction of that, roughly ₹1,350 crore cumulative as of December 2025. R&D spend, meanwhile, has fallen from 0.79% of sales to 0.40% over the decade, so the sector's growth so far reads as a volume and capacity story more than an innovation or policy-incentive-driven one.
Geography: Maharashtra and Tamil Nadu neck and neck, Karnataka the value outlier
Maharashtra (22.1% of national GVO, ₹3,59,184 crore) and Tamil Nadu (20.5%, ₹3,34,310 crore) are close rivals at the top, with Haryana a clear third (18.9%, ₹3,07,282 crore). Together with Karnataka and Gujarat, the top-5 states account for roughly 75.5% of national output, a tighter geographic concentration than most other manufacturing sectors, consistent with the auto industry's cluster-anchored structure. Karnataka is the notable outlier: the highest wages per worker among the top-5 (₹3,09,701) paired with the smallest factory count and GVO share, suggesting a smaller number of higher-value component and precision-engineering operations rather than high-volume assembly. Haryana's investment pipeline is shrinking even as its output share holds, consistent with a mature, already-built-out cluster rather than a frontier for new capacity.
Clusters: closely aligned with state-level geography
Four major clusters are profiled, each built around named anchor OEMs and testing infrastructure, including ARAI, ICAT and GARC: Chennai (Tamil Nadu), Pune (Maharashtra), Gurugram-Manesar-Bawal (Haryana) and Sanand (Gujarat). These locations closely match the leading states identified above. All four are export-oriented, three fully and one partially.
R&D: a laggard, and a declining one
R&D spend as a share of sales fell from 0.79% in 2014-15 to 0.40% in 2024-25, more than halving over the decade and remaining throughout in the "laggard" band (below 1%). This is a different pattern from a flat structural feature: the decline suggests sales growth has consistently outpaced R&D investment, even as the sector has become financially healthier by every other measure. Read alongside the PLI scheme's thin actual disbursement to date, the sector's decade of growth looks driven overwhelmingly by scaling existing production and capitalising on demand cycles (BS-VI transition, EV adoption, public infrastructure spend) rather than by a shift toward higher R&D intensity.
Explore the sector: interactive mindmap
Automotive and Transport Equipment is a sector where scale, firm financial health and the official output index are all moving in the same direction at once, a stronger combination than most manufacturing sectors show. The open questions sit elsewhere: a trade balance that swings between deficit and surplus year to year rather than holding a steady direction, a firm-level forex position that stays negative even in trade-surplus years, an R&D share that is falling rather than flat, and a PLI scheme whose actual disbursement has barely begun relative to its committed size. None of these undercut the headline growth story, but they mark where the sector's next phase of competitiveness will actually be decided.
References
Methodological Notes
Institute of Manufacturing and Economy · Sector Snapshots · August 2026 · NIC Divisions 29, 30 · Primary research: Nidhi Patel · Compiled by: Riddhi Bhargava
Author's Profile
Nidhi Patel is a student in the Family Business and Entrepreneurship programme, Class of 2029. She interned at the Institute of Manufacturing and Economy and conducted the primary research for this sector snapshot.