India Becomes A Critical Hub in China+1 Strategy for Auto Giants: EY-Parthenon

In a world currently being influenced by Trump's tariff tactics, India is being considered as the key for a China+1 strategy adopted by auto OEMs, with automotive majors look to diversify their supply chains, and reduce dependency on China, as per a joint report by EY and Parthenon.

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

The momentum seems to be picking up backed by low production costs and centre-backed incentives, notably production-linked-incentives (PLI) scheme for the auto vertical.

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.

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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.

Earlier in May, Amitabh Kant, ex-CEO of the NITI Aayog, 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."

On the other hand, Chief Economic Adviser Anantha Nageswaran mentioned 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.