Japanese automakers shift gears to India with $11 billion investment push

Japanese auto giants Toyota, Honda, and Suzuki are collectively investing nearly $11 billion in India, marking one of the country’s largest-ever foreign investment pushes in the automobile sector. The move highlights India’s emergence as a manufacturing and export base as global automakers seek to reduce reliance on China.

India’s combination of low costs, a skilled workforce, and supportive government policies is drawing record attention from Japan’s auto industry. Suzuki, which controls about 40 per cent of India’s car market, will invest $8 billion to boost production to 4 million vehicles annually. Toyota plans to add another $3 billion, expanding its hybrid component supply chain and building a new plant in Maharashtra. Honda isn't missing the boat either and promises to make the country an export base for one of its upcoming Zero Series electric cars, set to roll out in 2027.

Strategic shift away from China

Japan’s investments in India’s transport sector have surged sevenfold since 2021, reaching 294 billion yen ($2 billion) last year, while funding to China dropped by over 80 per cent in the same period. Analysts attribute this to intensifying price wars and shrinking profits in China’s EV market.

“India offers better margins and fewer competitive pressures than China,” said Julie Boote of Pelham Smithers Associates.

Toyota and Suzuki lead the charge

Toyota plans to launch 15 new or updated models in India by 2030, targeting a market share increase from 8 to 10 per cent. Its latest investments will lift capacity to over 1 million vehicles a year.

Suzuki, on the other hand, aims to transform India into its global export base, leveraging Maruti Suzuki’s dominance in domestic and overseas markets. “We would like to grow India as Suzuki's global production hub,” said Toshihiro Suzuki, company president.

Honda’s electric ambitions

For Honda, India is becoming central to its global car strategy. CEO Toshihiro Mibe said the country now ranks among Honda’s top three car markets, alongside the U.S. and Japan.

Policy tailwinds strengthen the shift

PM Modi's government incentives and restrictions on Chinese investment have made India more attractive for foreign automakers. The auto industry produced 5 million passenger cars last fiscal year, with exports up 15 per cent. “India's protectionist stance toward neighbouring countries is a blessing in disguise for Japanese carmakers,” commented Gaurav Vangaal of S&P Global Mobility.

Challenges

Challenges persist, with Tata Motors and Mahindra & Mahindra capturing growing SUV demand and squeezing Suzuki’s market share. Yet, the outlook remains positive as Japanese automakers deepen localisation and strengthen their long-term foothold. India, once a secondary market, is set to become the new growth engine for Japan’s car industry.