Toyota, Honda and Suzuki shift gears from China to India

• Toyota, Honda and Suzuki plan combined investments exceeding $11 billion in India
• Japanese carmakers pivot away from China amid price wars and shrinking margins
• India’s low costs, strong labour base and government incentives draw manufacturers
• Modi government’s policies and China curbs aid foreign carmakers’ expansion

Japanese carmakers Toyota, Honda and Suzuki are investing billions of dollars in India, turning the country into a key manufacturing and export hub as they shift production away from China.

Toyota, the world’s largest automaker, and Suzuki, India’s market leader with nearly a 40 per cent share, have announced investments totalling about $11 billion to strengthen local manufacturing and exports. Honda, meanwhile, said last week it will make India the production and export base for one of its upcoming electric cars.

India’s lower costs, large labour pool and government incentives are making it increasingly attractive for Japanese manufacturers reconfiguring global supply chains to cut dependence on China.

Industry executives say India offers another advantage: limited competition from Chinese electric vehicle (EV) makers, who face restrictions on investment in the Indian market. That allows Japanese carmakers to operate without facing the intense price competition that has squeezed margins in China.

“India is a good choice as a replacement market for China,” said Julie Boote, autos analyst at Pelham Smithers Associates in London, noting that profits have become difficult to sustain in China. “For the time being, the Japanese think it’s a much better market because they don’t have to deal with the Chinese competitors,” she added.

Executives also cited the improving quality of Indian manufacturing and government incentives introduced under Prime Minister Narendra Modi’s “Make in India” initiative.

Toyota ramps up local operations

Japan’s direct investment in India’s transport sector, which includes automotive manufacturing, has jumped more than sevenfold between 2021 and 2024 to reach 294 billion yen ($2 billion) last year. Over the same period, investment in China’s transport sector fell 83 per cent to 46 billion yen.

Toyota is working with Indian and Japanese suppliers to lower costs and expand hybrid component production. An executive at one of Toyota’s key suppliers said the company was increasingly tailoring models to local preferences. “It is no longer about global specifications but about local ones,” the executive said.

Toyota plans to launch 15 new and refreshed models in India by the end of the decade, targeting a 10 per cent share of the passenger car market, up from the current 8 per cent.

“The Indian market is extremely important and is set to grow in the future,” Toyota President Koji Sato said at the Japan Mobility Show last week.

Last year, Toyota announced investments exceeding $3 billion to expand capacity at its existing southern India plant and to build a new factory in Maharashtra, expected to begin production before 2030. These moves are expected to take Toyota’s total production capacity in India beyond one million vehicles.

The automaker has also cited India’s growing contribution to profits, particularly as its North American operations face pressure from tariffs.

Modi government support and market dynamics

India’s economy has grown at an average rate of around 8 per cent over the past three fiscal years. The Modi government is seeking to sustain that momentum by attracting global manufacturers through production-linked incentives and export-focused policies.

India produced about five million passenger cars last financial year, exporting nearly 800,000. While domestic sales grew by around 2 per cent, exports rose 15 per cent.

Government restrictions on Chinese investments have also benefited Japanese automakers. “India’s protectionist stance toward neighbouring countries is a blessing in disguise for Japanese carmakers,” said S&P Global Mobility’s Gaurav Vangaal. “Because of this, they see an opportunity to expand investment in India, enhancing their cost competitiveness against domestic players.”

Local automakers such as Tata Motors and Mahindra & Mahindra have increased their SUV offerings, gradually eating into Suzuki’s market share, which fell from about 50 per cent before the pandemic to around 40 per cent now.

India, however, remains a challenging market. Foreign players including Ford and General Motors have exited after struggling to achieve profitability.

Honda and Suzuki strengthen India focus

For Honda, India remains its largest two-wheeler market, and the company now aims to expand its four-wheel business. Chief Executive Toshihiro Mibe said Honda’s top three car markets are the United States, India and Japan.

The company plans to make India the production and export base for one of its “Zero Series” electric cars, with exports to Japan and other Asian markets expected to begin in 2027.

Suzuki, meanwhile, has announced an $8 billion investment to increase its production capacity in India from 2.5 million to 4 million vehicles annually. Its Indian arm, Maruti Suzuki, remains the country’s largest carmaker and exporter.

“We would like to grow India as Suzuki’s global production hub,” President Toshihiro Suzuki said at the mobility show. “We would like to enhance exports from India.”

(With inputs from Reuters)