EV growth reshapes automotive manufacturing, creating new climate-aligned opportunities and compliance challenges. ESG BROADCAST shares key takeaways.
India’s rapid transition to electric mobility is reshaping the automotive landscape, placing both pressure and promise on the country’s micro, small, and medium-sized enterprises (MSMEs). As the world’s fourth-largest vehicle market and home to over 37 million automotive jobs, India is witnessing a structural shift catalysed by climate policy, market demand, and fiscal incentives aimed at reaching 30% electric vehicle (EV) penetration by 2030.
With a compound annual growth rate (CAGR) of 57% between 2018 and 2024, EVs now account for 7.5% of India’s auto sales. This momentum is driving strategic changes in manufacturing ecosystems—particularly within the auto-component manufacturing (ACM) sector, which reported a turnover of USD 74 billion in FY 2024. MSMEs form the foundation of this sector, representing around 80% of ACM enterprises and contributing roughly 25% of its total output. These firms supply essential parts to global and domestic original equipment manufacturers (OEMs) through tiered production networks and play a pivotal role in regional industrial clusters.
However, the shift from internal combustion engine (ICE) vehicles to electric powertrains is exposing MSMEs to disproportionate risk. A significant share of ICE-specific parts is on the brink of obsolescence as the market pivots toward batteries, inverters, traction motors, and other EV-specific components. While OEMs and Tier-1 suppliers pivot more easily due to scale and capital, MSMEs face steeper barriers, including high capital costs, limited technical expertise, and a lack of assured EV demand.
Most MSMEs remain hesitant to diversify into the EV segment. Those that have made the transition, however, report more robust order books, improved revenue diversification, and access to global export markets. For these early movers, alignment with decarbonization goals and low-emission technologies has not only preserved competitiveness but unlocked new growth channels.
Government support will be crucial to enable wider participation. Financial incentives, technology transfer programs, and skill development schemes tailored to the MSME segment are urgently needed to prevent exclusion from future value chains. Without targeted intervention, a large portion of the sector could face contraction, undermining both employment and the broader EV rollout objectives.
Strategic significance lies in preparing MSMEs for the EV era with timely investment in production upgrades, retooling, and supply chain adaptation. This shift represents not merely a risk, but a vital opportunity to create a more resilient, innovation-led manufacturing base that aligns with India’s climate commitments and responsible business frameworks.
ESG BROADCAST will continue monitoring the updates related to this topic. Stay tuned to be updated on the related policy and pivotal regulatory shift.
