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Key Points

India is fast becoming a preferred destination for global automakers under the China+1 strategy. Government incentives like the PLI scheme are accelerating auto component exports. Experts emphasize the need for innovation to surpass Chinese manufacturing dominance. The country's stable economy and skilled workforce further strengthen its position as a global manufacturing hub.

Key Points: India Emerges as Key Auto Hub in Global China+1 Strategy

  • India's auto exports surge to $61.8B under PLI incentives
  • Global OEMs shift supply chains via China+1 strategy
  • Low manufacturing costs boost India's competitiveness
  • Experts urge R&D focus to outpace Chinese dominance
2 min read

India becoming key pillar to the China+1 strategy for global auto OEMs: EY-Parthenon

India's low costs and PLI incentives make it a top choice for global auto OEMs diversifying from China, says EY-Parthenon report.

"You have to beat the Chinese with one up. This game of China plus one by importing from China all the time will never work. – Amitabh Kant"

New Delhi, August 9

India is rapidly becoming a central pillar of the China+1 strategy adopted by global auto OEMs, as companies look to diversify their supply chains and reduce dependency on China, according to a joint report by EY and Parthenon.

"India is becoming a key pillar to the China+1 strategy being adopted by global auto OEMs for components. Additionally, low mfg. costs + GoI induced incentives are further boosting exports," the report said.

The report highlights that this shift is driving increased business with Indian original equipment manufacturers (OEs), positioning the country as a preferred sourcing hub.

Boosting this momentum are low manufacturing costs and government-backed incentives, notably the Production-Linked Incentive (PLI) Scheme for the auto sector. With a financial outlay of USD 3 billion, the scheme offers 8-18 per cent sales-linked incentives for advanced and electric vehicle components. It has already catalysed auto component exports worth USD 61.8 billion.

Together, the China+1 strategy and strong policy support are propelling India's rise as a global auto component export hub, the report pointed out.

The China+1 strategy is a business strategy where companies diversify their manufacturing and supply chains by choosing another location besides China, reducing reliance on a single country.

This strategy shows the desire of companies to mitigate risks associated with over-dependence on China, such as geopolitical tensions, supply chain disruptions, and rising costs.

However, experts say that companies have to invest in research and development (R&D) to take advantage of opportunities.

Amitabh Kant, Former CEO of the NITI Aayog, during an industry gathering in May, said, "You'll have to do the technology leapfrogging. You can't copy the Chinese. You have to beat the Chinese with one up. This game of China plus one by importing from China all the time will never work."

Meanwhile, Chief Economic Adviser Anantha Nageswaran said that India, given its political stability, huge market opportunity, dynamic workforce, and steady rise in income levels, is eyed as one of the best places to set up manufacturing bases.

India remains the fastest-growing major economy and is poised to maintain its growth trajectory.

- ANI

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Reader Comments

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Sarah B
While this is positive, we must be cautious. Many companies still prefer China for critical components. India needs massive R&D investment to truly compete. Amitabh Kant's warning about not copying China is spot on!
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Ananya R
Jai Hind! 🚗 This China+1 strategy is our golden opportunity. With our young workforce and government support, we can become the world's auto hub. But we must improve infrastructure - better roads, ports and stable electricity supply needed.
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Vikram M
$61.8 billion exports is no joke! But let's not celebrate too early. Chinese manufacturing is still 5-10 years ahead. We need to focus on skill development and automation to bridge this gap. The PLI scheme should include training programs.
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Kavya N
As someone working in auto components industry, I can see the change happening. More foreign clients, better technology transfers. But the real test will be sustaining this when China bounces back post their economic slowdown.
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Michael C
India's political stability is indeed a big plus compared to China. But ease of doing business needs more improvement - less red tape, faster approvals. If these are fixed, India can truly become the next manufacturing powerhouse.

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