India's automotive sector is undergoing a period of transition. For Western multinational manufacturers, the country has represented a market with significant scale, alongside intense local competition, import tariffs that make foreign models expensive, and utilisation rates that have often not justified the level of capital investment.

In 2025 and into 2026, manufacturers are adjusting their strategies by shifting focus from domestic sales to export-led manufacturing, pursuing joint ventures with Indian partners, and, in several cases, using India's engineering cost base as a source for conventional engines that European facilities are reducing or discontinuing.

"The Chennai investment is widely interpreted as Ford's plan to eventually release Sanand to Tata entirely, replacing Sanand's output with a newer, larger-scale operation," said an automotive analyst.

Ford: Engines over cars

Ford exited passenger car production in India in 2022 and has no plans to re-enter the segment. However, the company continues to maintain manufacturing operations in the country. In November 2024, Ford announced a US$ 370 million investment to modernise its former powertrain factory in Chennai, with production of a new engine range expected to begin by 2029 at an annual capacity of 235,000 units. The surrounding region has an established engine component supply network.

In the interim period, Ford continued producing engines at its Sanand factory, which it sold to Tata Motors in 2023 while retaining access through a leaseback arrangement. The facility has been manufacturing engines for the Ford Ranger assembled in Thailand. The Chennai investment is viewed as part of Ford's plan to eventually transfer Sanand fully to Tata, replacing its output with a larger-scale operation in Chennai. Export destinations for the Chennai-produced engines have not yet been disclosed.

Renault and Nissan: An evolving alliance

The situation involving Renault and Nissan in India reflects developments within their global partnership. The companies previously operated a joint-venture factory in Chennai, with Nissan holding a 51% stake. Following Nissan's financial challenges, the company sold its stake to Renault, which now has full ownership of the plant.

Renault has designated the Chennai factory as its fifth core manufacturing location outside Europe and committed US$ 600 million towards production expansion. The facility will manufacture SUVs for both brands, with Renault producing vehicles for its own sales network and Nissan operating through a contract manufacturing arrangement. Key upcoming models include the Renault Duster, sold in India under the Renault brand rather than Dacia as in Europe, and the Nissan Tekton, its equivalent model. A seven-seat vehicle for both brands, believed to be based on a modified version of the Renault Boreal produced in Brazil, is also planned.

Historically, utilisation at the factory has remained below 50% of capacity. With both manufacturers expanding their Indian product portfolios and targeting export markets in Southeast Asia and southern Africa, Renault expects utilisation to reach 80% in the near term, with the possibility of reaching full capacity thereafter. Renault sold approximately 38,000 vehicles in India in 2025, representing a market share of around 1%, indicating the importance of exports to the plant's operations. Despite divesting its ownership stake, Nissan intends for Renault to manufacture approximately 200,000 vehicles annually on its behalf, equivalent to 40% of the plant's potential output. Nissan is also expanding its Indian dealership network from 150 to 250 outlets.

Stellantis: Expanding an established Indian footprint

Stellantis sells fewer than 10,000 Citroen vehicles and fewer than 3,000 Jeep vehicles annually in India, representing a market share below 1%. However, the company maintains a substantial operational presence in the country. Stellantis operates a vehicle manufacturing plant in Tiruvallur, Tamil Nadu, producing approximately 30,000 Citroen vehicles annually from a total capacity of 60,000 units.

The company also operates research and software development centres across four Indian cities. It also runs a 300,000-unit engine manufacturing plant and a 375,000-unit transmission facility in Hosur, with production volumes exceeding domestic demand and supporting export operations.

Stellantis also maintains a 50:50 joint venture with Tata Motors at Ranjangaon, where Jeep Compass models are assembled alongside Tata vehicles. A memorandum of understanding signed in early 2026 indicates further expansion of the partnership, although specific details have not been disclosed.

A US$ 110 million investment programme is currently underway to expand the Citroen and Jeep model ranges assembled in India and increase local sourcing levels. Engines currently achieve 50% local content, while transmissions reach 60%.

The future role of the Hosur powertrain operation remains uncertain. In November 2024, Stellantis designated the facility as a global supply hub for conventional engines and transmissions while European demand shifted towards electric vehicles. Since then, Stellantis has reduced the value of its EV investments and shifted focus back towards internal combustion and hybrid vehicles in Europe, including the reintroduction of diesel options in certain markets.

It remains unclear whether Hosur's role will expand or contract following that shift, particularly given labour union and government pressure in France against transferring additional powertrain production to India.

Germany's luxury manufacturers: Limited scale and cautious expansion

BMW assembles approximately 17,500 vehicles annually at its Chennai facility, producing ten different models with around 50% local content. This has partly been achieved through sourcing engines from Force Motors. In January 2026, BMW confirmed plans to introduce additional models in India, including components for the BMW iX1.

Mercedes-Benz operates at a comparable scale, with annual production capacity of 20,000 units. In September 2025, the company indicated the possibility of expanding Indian production to establish an export business aligned with the Indian government's Make in India initiative. Mercedes-Benz previously exported Mercedes-Benz GLC models from India to the United States during 2018 and 2019.

Volkswagen faces a difficult situation in India. The company's Pune plant has annual capacity of 250,000 units and manufactures Volkswagen and Skoda vehicles, while a smaller Aurangabad facility assembles Audi models from imported kits. Combined output remains below installed capacity, with approximately 160,000 units produced in 2024, equivalent to 64% utilisation.

Volkswagen is also involved in a tax dispute with the Indian government that could result in penalties of up to US$ 2.8 billion. Discussions regarding a potential joint venture with Mahindra ended in late 2024 without agreement. Reports published in October 2025 indicated that the company offered early retirement packages to all 2,300 employees at its Indian factories. Despite demand for the Skoda Kylaq and Skoda Kushaq, along with limited kit exports to Vietnam and Latin America, Volkswagen has not yet established a long-term strategy for the Indian market.

"Unlike state-owned Chinese rivals, BYD's relative independence from Beijing may give it greater flexibility in overseas manufacturing, and India could become one of its manufacturing locations," the analyst stated.

New entrants: VinFast and BYD

VinFast is preparing to open its first manufacturing facility outside Vietnam in Tamil Nadu, with initial annual capacity of 50,000 units and potential expansion to 150,000 units. The plant will manufacture the VinFast VF6 and VinFast VF7 electric SUVs for the Indian market and export destinations across Southeast Asia, the Middle East, and Africa. Total planned investment stands at US$ 2 billion and includes electric motorcycles and buses in addition to passenger vehicles. The company is also in discussions with battery suppliers, including Tata-Gotion, regarding local sourcing.

BYD is evaluating a semi-knock-down (SKD) assembly operation in India. The company sold approximately 5,500 vehicles in India in 2024 under existing import regulations, which impose a 110% tariff on fully imported vehicles. Local SKD assembly would reduce the tariff to 30%.

A proposed US$ 1 billion investment submitted in 2023 was not approved by Indian authorities. However, discussions regarding the company's market entry strategy are understood to be ongoing. Unlike several state-owned Chinese competitors, BYD's corporate structure may provide greater operational flexibility for overseas manufacturing expansion.