In September, when Ford Motor Company announced its intention to reopen its Chennai plant—it had stopped operations in 2021—primarily for exports, the development grabbed headlines. Ford’s announcement puts the spotlight on the emergence of India as an export hub for foreign carmakers.

Whether it is Maruti Suzuki, which entered the Indian market in 1981, or Kia Motors, the youngest kid on the block that entered India in 2017, exports are becoming an increasingly significant part of their strategies, and revenues. While Indian exports have conventionally been sent to markets in Africa and Latin America, Japanese carmakers such as Honda and Maruti (58 percent of its equity is held by the Japanese Suzuki Motor Corporation) are now exporting passenger vehicles to their home country as well, marking a shift away from a general perception that Indian products were not good enough for developed markets.

“In 2024, the number of cars exported from India was about 670,000 units” says Hemal Thakkar, senior practice leader and director, Crisil. “Exports have increased as a total percentage of sales, to 15 to 16 percent” He adds that earlier, more than 50 to 60 percent of exports comprised hatchbacks, whereas about 20 percent was SUVs; today, SUVs comprise about 40 percent of exports.

Maruti Suzuki—the largest exporter of passenger vehicles from India—had been exporting vehicles to Europe since 1987-88, but this had remained a small number of units and had never gone mainstream. “Given the vision of Prime Minister Narendra Modi’s Viksit Bharat programme, we realised that the ambition cannot be fulfilled by domestic demand alone. India has to take a larger share of the global market, which is by exporting more. And it became clear to us, whether it is for India or for our own business, we have to export more and we have to grow it exponentially” says Rahul Bharti, executive director, corporate affairs, Maruti Suzuki India Limited (MSIL).

Consequently, the company’s exports have increased by three times over what they were around four years ago. “We were exporting around 96,000 units in FY21, while last year we did about 2,83,000 units. We hope to export something like 8,00,000 by 2030-31” says Bharti. “We are not growing in percentage terms; we are growing in multiples”

“Export is an important piece of our overall strategy” says Saurabh Vatsa, Managing Director, Nissan Motor India. As part of its mid-term plan, one that it calls The Arc and which stretches between FY24 and FY26, the Japanese carmaker is targeting to sell 1,00,000 units in exports.

The existing Nissan Magnite (available as a right-hand drive variant) was being exported to about 20 countries, while the new version that was launched in October, showcases the first left-hand drive variant, which will be exported to more than 45 countries. “We are developing India as a massive Nissan export hub, and whatever cars that we are going to introduce in India, they are going to be exported as well”.

Several factors have spurred the volume of automobile exports from India. While some of these have been direct consequences of the government’s role in signing various kinds of trade agreements with the governments of other countries, others are results of improved technological and manufacturing know-how and prowess among carmakers.

“Global original equipment manufacturers (OEMs) have realised that the cost of manufacture is lower in India, because of the lower cost of labour and other input materials, and higher productivity levels” says Thakkar of Crisil. “Earlier, German manufacturers, for example, would make their vehicles in India, but would import their transmission parts from their home countries or other manufacturing centres. This has now changed in favour of India, as these carmakers are getting more confident about making entirely in India, and exporting as well”

Proving Thakkar’s point is Volkswagen India, which experienced strong export demand in FY24 and shipped 44,180 units. It recorded a 63 percent year-on-year growth, from 27,137 units in FY23, thus becoming the fourth largest auto exporter from India, up from being the sixth largest in FY23.

Thakkar adds that the presence of large ports such as Mundra in Gujarat, JNPT in Navi Mumbai, and in Chennai has been an enabling factor. “Congestion levels at these ports have eased, which has a positive impact on logistic costs” he adds.

Till a few years ago, auto exports from India were mostly to Africa, Latin America, Sri Lanka and Bangladesh. Although they are still dominated by Africa and Latin America, new markets such as the Middle East, Europe and Australia are opening up. In March, India announced a new free trade deal with the European Free Trade Association (EFTA), which includes Iceland, Liechtenstein, Norway, and Switzerland—countries not in the European Union. The deal was finalised after more than 15 years of negotiations and will remove import tariffs on industrial goods from EFTA states. The agreement entails $100 billion worth of investments across a range of sectors in India, including manufacturing. The EFTA deal followed the signing of trade agreements between India and Australia, and the UAE.

Other export barriers in the past were factors such as vehicles made in India having BS4 emission norms while developed nations like the US having Euro VI emission norms. In 2020, India implemented BS6 emission norms, which are almost equivalent to Euro VI norms. Last year, the government launched the Bharat New Car Assessment Programme, to provide safety ratings to cars made in India. Along with making passenger vehicles safer for Indian roads, these ratings are also meant to make India-made vehicles more saleable in foreign markets.