Increased demand and strategic shifts by global corporations are acting as growth factors for the sector. The home-grown automobile sector is also relying on this new-age trade practice as it allows companies to reduce capital expenditure on infrastructure, equipment and labour. 

Different industries within India have found a fondness towards contract manufacturing owing to several factors. The sector is experiencing significant growth driven by increased demand and strategic shifts by global corporations.

Policies like ‘Make in India’ act as a catalyst for the growth by offering incentives to boost domestic manufacturing. The Central Government has also introduced measures to attract foreign investment in electric vehicle (EV) manufacturing, aiming to establish India as a hub for EV production.

The home-grown automotive sector is also seen relying more on this new-age trade practice. From commercial to passenger vehicles, contract manufacturing allows automakers to reduce capital expenditure on infrastructure, equipment and labour. Instead of investing heavily in setting up factories, companies can focus on product development, marketing and other areas while leveraging third-party manufacturers.

Speaking to Motoring Trends, Layam Group Chairman G S Ramesh said, “The automobile industry encompasses plenty of activities including assemblies, subassembly etc. Currently, there is a shortage of labour within the industry. Contract manufacturing is picking pace as it helps companies to offload certain responsibilities without compromising on quality standards.”

“Companies involved in contract manufacturing take full responsibility of the products and are extremely cautious about quality and skill aspects. They produce the products in tandem with set quality standards and get paid in return,” he added.

Companies involved in this model also cut back on employee costs as contractors hire their own workforce and are responsible for their career progression.

Layam Group is involved in automobile, smartphone and other sectors for contract manufacturing. It reported an INR 3-4 billion turnover with 70 percent revenue coming from the automobile and engineering sectors.

Commenting on the same, Ramesh explained, “We have been involved in the space for the past few years. We have undertaken two kinds of models. One is contract manufacturing, and the other is job contract model. In the job contract model, we assume the role of a third-party quality inspector of the contract issuer’s product line.”

Alluding to vehicle segments the company manufactures under contracts, he noted, “We are involved in the commercial vehicle segment, where we produce the body frame for Tata Motors’ buses. We produce electric buses too and are also involved in logistics, shell making, final panelling etc. The manufacturing unit is in Dharwad and Lucknow.”

Commenting on market opportunities, the executive noted, “India’s contract manufacturing sector presents a compelling growth story, driven by rising demand for trusted partners among OEMs and smaller manufacturers alike. The opportunity lies in how effectively firms can position themselves as reliable collaborators. Clients are increasingly open to outsourcing, provided they find dependable service providers, creating a strong business case for contract manufacturers.”

“Small and medium enterprises are also showing interest in contract manufacturing, seeking to integrate themselves into broader supply chains. This trend signals a growing ecosystem where even niche players can secure a foothold,” he added.

However, the key challenge remains a mindset shift. Traditional industry players often resist adopting technology-driven solutions, preferring conventional methods. Yet, once convinced, they integrate seamlessly, underscoring the importance of strategic engagement. The availability of skilled resources is less of a bottleneck, given the emergence of hire-train-deploy models that ensure workforce readiness.

“In an increasingly competitive landscape, transparency and trust emerge as the defining factors for success. Companies that establish credibility and deliver on performance expectations will secure long-term partnerships and growth,” said Ramesh.

Pune-headquartered two-wheeler and three-wheeler major Bajaj Auto has announced its wholesales for March 2025 and FY2025.

For March, the company witnessed flat growth, selling a total of 369,823 vehicles, which was 1 percent higher YoY, compared to 365,904 units for the same period last year.

In contrast to two-wheeler sales, which were flat at 315,732 units (0.59 percent), the three-wheeler sales grew by 3.98 percent, primarily driven by an 11 percent increase in exports.

On the other hand, for FY2025, the company reported a robust growth of 6.9 percent, selling a total of 4.65 million vehicles, as compared to 4.35 million units last year.

The two-wheeler sales came to 3.98 million, up 6.82 percent YoY. This includes 2.30 million two-wheelers sold in the domestic market, up 2.5 percent YoY and 1.47 million units exported, up 13.3 percent YoY.

The three-wheeler sales came to 668,657 units, which was 7.3 percent higher as compared to 623,010 units sold last year. The domestic sales grew by 3.3 percent YoY, while exports grew at 19 percent YoY, respectively.

Swaraj Tractors partners Mahindra Susten to establish what it claims is Punjab’s largest solar group captive project – a 26 MW solar energy installation in the Bathinda district.

The initiative will supply renewable energy to four manufacturing locations of Swaraj Tractors, which will enable it to scale up the share of renewable energy in production to 50 percent. The project will generate approximately 60 million kWh of renewable energy annually, which will cut down about 54,600 tonnes of CO2 emissions.

Hemant Sikka, President, Farm Equipment Sector, Mahindra & Mahindra, said, “With this groundbreaking solar project, we are taking a pioneering step in introducing green energy at such a large scale in tractor manufacturing for the first time in India. The initiative aligns perfectly with our vision of ‘Transforming Farming and Enriching Lives’, while advancing toward a sustainable future.”

Gaganjot Singh, CEO, Swaraj Division, Mahindra & Mahindra, said, "This solar project is a testament to our unwavering commitment to creating a cleaner, greener future. By leveraging Mahindra Susten’s expertise, we are confident of achieving our renewable energy goals and making a significant contribution to Punjab's evolving energy landscape."

Deepak Thakur, Managing Director and CEO, Mahindra Susten, said, "At Mahindra Susten, our vision is to deliver clean and efficient energy solutions to the Commercial and Industrial (C&I) sector, and we are doing so by developing bespoke power plants tailored to optimally serve each C&I client requirements. We are proud to partner with Swaraj Tractors in their sustainability journey and to bring our renewable energy expertise to Punjab. Together, we aim to drive the adoption of green energy and contribute to India’s transition toward a renewable future."

Mumbai-headquartered commercial vehicle and passenger vehicle major Tata Motors has announced its wholesales for FY2025 and March 2025.

The company sold a total of 912,155 vehicles across the passenger vehicle and commercial vehicles segment, which was 4 percent lower compared to last year. This includes 358,570 commercial vehicles, down 5 percent YoY and 553,585 passenger vehicles, down 3 percent YoY. 

For March 2025, the commercial vehicle sales came at 90,500, a flat decline as compared to 90,822 units last year, while passenger vehicle sales came at 51,616 units, up 3 percent YoY as compared to 50,110 units for the same period last year.

Girish Wagh, Executive Director, Tata Motors, said, “FY2025 ended on a positive note for commercial vehicles industry, post the YoY demand decline witnessed earlier. Tata Motors Commercial Vehicles navigated the headwinds effectively, to record wholesales of 376,903 units, outpacing industry growth in trucks and commercial passenger carriers, thereby strengthening its Vahan registration market share. Reinforcing our commitment to green, future-ready technologies, we launched India's first hydrogen-powered heavy-duty truck trials, while our e-bus fleet collectively covered over 30 crore km nationwide. In Q4 FY2025, the sustained YoY improvement in sales volumes over successive quarters gained further momentum with both trucks and passenger carriers registering healthy growth, in line with the annual trend.”

“Looking ahead to FY2026, we anticipate sustained growth despite global headwinds. Demand is expected to rise, driven by higher fleet utilisation, financial support from rate cuts, lower crude oil prices and a renewed focus on large-scale infrastructure projects. At the same time, we remain mindful of the potential impact of new regulations mandating truck cabin air conditioning on vehicle prices. We will continue to closely monitor government infrastructure spending and growth across key end-use segments. With an expansive product portfolio, smart digital solutions and new nameplate launches on the anvil, Tata Motors Commercial Vehicles is well-positioned to leverage market opportunities and maintain its growth trajectory,” added Wagh.

Shailesh Chandra, Managing Director, Tata Motors Passenger Vehicles and Tata Passenger Electric Mobility, said, “Passenger vehicle sales is expected to reach 4.3 million units in FY2025, reflecting a modest 2 percent growth. SUVs continued to dominate the market with double digit growth and accounted for around 55 percent of new car sales. Preference for emission-friendly CNG vehicles surged by around 35 percent and EVs showed renewed promise, with more industry participants enhancing customer choices and strengthening the ecosystem. Amidst a challenging year marked by fluctuating demand, Tata Motors Passenger Vehicles achieved wholesales of 556,263 units, including 64,726 units of EVs. We led the industry in SUV growth and outpaced it in CNG sales, recording over 50 percent YoY growth. Across various segments of the PV industry, Punch emerged as the top choice for private buyers to become India’s No. 1 SUV in FY25. Our latest launches and updates – Curvv, Nexon CNG and Tiago – received an enthusiastic response, resonating strongly with customers. We achieved two key milestones in FY25, as we surpassed 6 million cumulative sales for PVs, and 200,000 cumulative sales for EVs.”

“Looking ahead, overall demand growth will be shaped by macroeconomic factors such as consumption growth, inflation, infrastructure spending and global geopolitics. However, industry momentum is expected to be driven by continued innovation in line with evolving customer preferences. SUVs, CNG, and EVs will remain key growth drivers, fuelling the industry's expansion. With a strategically aligned product portfolio, supported by new nameplate launches and our multi-powertrain strategy, Tata Motors is well positioned to seize market opportunities and sustain its momentum,” added Chandra.

Skoda Auto Volkswagen India, a leading passenger vehicle manufacturer, has been recognised as the ‘Top Exporter 2023-2024’ by the Mumbai Port Authority for shipping one of the highest numbers of vehicles in the period.

The automaker has been exporting made-in-India cars for more than two decades and has till date has shipped over 675,000 vehicles and counting.

Skoda Auto Volkswagen India shared that in FY2023-2024, it exported over 43,000 vehicles manufactured in India to more than 26 countries across Asia, Africa and North America. This includes Volkswagen Virtus, Volkswagen Taigun and Skoda Kushaq. In 2024, the company exported 40 percent of the total vehicles produced in India to other countries.

Furthermore, the automaker is also exporting parts and components to Vietnam from its Parts Expedition Centre in Pune to support local vehicle assembly in the region.

Piyush Arora, Managing Director & CEO, Skoda Auto Volkswagen India, said, “We are honoured to receive this award. This recognition is a testament to our unwavering commitment to quality, innovation, and the growing global presence of cars engineered and manufactured in India. Over the years, we have demonstrated our capabilities as a key export hub, and we remain dedicated to strengthening India’s role in the global automotive industry. We extend our gratitude to the port authorities, our dedicated teams, partners, and stakeholders who have made this success possible. As we look ahead, we will continue to explore additional export opportunities while maintaining the momentum into 2025.”

Image for representational purpose only.