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.

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SABIC (Saudi Basic Industries Corporation), one of the largest petrochemicals manufacturers globally, has signed a Memorandum of Understanding with CEER, Saudi Arabia's electric vehicle brand, to explore cooperation in applying SABIC's materials and solutions in the design, development and manufacture of electric vehicles.

The signing ceremony took place at SABIC's headquarters in Riyadh, with attendance from SABIC CEO Dr. Faisal M. Alfaqeer and CEER CEO James DeLuca.

The agreement establishes a framework for evaluating the use of SABIC materials in EV applications and jointly developing material and processing solutions. The collaboration also covers knowledge sharing on sustainability and technology, exploring strategic sourcing opportunities to build a local supply chain and identifying joint areas of cooperation.

Dr. Al-Faqeer, said, “The memorandum represents a strategic collaboration which leverages SABIC’s global expertise in advanced material solutions for the electric vehicle industry. Through this partnership, we aim to accelerate innovation, enhance local content and build an integrated national supply chain that enhances global competitiveness. This collaboration also reflects our shared commitment to contribute to Saudi Vision 2030 and the National Industrial Strategy, empowering national talent, and strengthening Saudi Arabia’s position as a regional hub for future industries and technologies.”

James DeLuca, said, “This strategic collaboration with SABIC marks a significant step in CEER's journey toward designing, engineering and manufacturing a world-class electric vehicle right here in the Kingdom of Saudi Arabia. In order to develop next-generation electric vehicles with leading safety and efficiency performance, we are partnering with global prominent companies that share our commitment to innovation. By integrating SABIC’s materials and deep technical expertise into our vehicles, we are building a robust and reliable local supply chain while enhancing CEER’s rule as a key player in the Kingdom’s transformation into sustainable advanced hub for mobility and technology, in alignment with the goals of Saudi Vision 2030.”

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TAFE Motors and Tractors has opened its DEUTZ engine production facility at its manufacturing plant in Alwar, Rajasthan. The facility was inaugurated by Colonel Rajyavardhan Singh Rathore, Minister for Industry & Commerce, Government of Rajasthan.

Under a licensing agreement with DEUTZ, TAFE Motors will manufacture 2.2-litre and 2.9-litre engines for domestic and international markets, targeting an annual production capacity of 35,000 engines and 50,000 sub-assemblies. The manufacturing setup incorporates Industry 4.0-enabled systems and digital connectivity.

Rajasthan’s Cabinet Minister, Rajyavardhan Singh Rathore, while addressing the gathering lauded TAFE's investment in the state, said, “TAFE’s new production facility at Alwar is a strong endorsement of Rajasthan's emergence as a preferred manufacturing destination and exemplifies the vision of 'Made in Rajasthan for the World' while contributing to the national goal of an Aatmanirbhar Bharat. I reaffirm the state's commitment to fostering a business-friendly ecosystem through progressive policies and ease of doing business. I also commend TAFE’s Chairman & Managing Director, Mallika Srinivasan for her visionary leadership and contributions to nation-building, and I appreciate the commitment of TAFE's workforce, supply chain partners, and next-generation leadership in driving innovation, skilling, and empowering India's farmers through world-class technology and manufacturing excellence”

Mallika Srinivasan, Chairman & Managing Director, TAFE, said, "Today marks a defining milestone in TAFE's growth journey. TAFE and the Amalgamations Group, together are one of India’s largest engine manufacturing ecosystems, with a production capacity projected to expand from 400,000 to 550,000 engines annually by 2030.”

She added, “Our partnership with DEUTZ, one of Europe's premier engine manufacturers and a pioneer in diesel engine technology brings together the precision of German engineering and the strength of India's manufacturing capabilities. This venture will also serve as a growth catalyst for the allied engineering industries in Rajasthan, further strengthening the state's position as a manufacturing hub. We extend our gratitude to the Government of Rajasthan for the continued support in enabling this landmark initiative."

Dr Lakshmi Venu, Vice Chairman, TAFE, said, " India's manufacturing sector is entering a new phase, driven by technology, operational excellence and globally benchmarked capabilities. The TAFE Motors - Deutz production facility reflects our commitment to and investments in, advanced manufacturing rigorous quality systems and continuous capability development that will enable us to respond to an evolving India and International market demand. With a 40 percent women workforce, the TAFE-DEUTZ production facility continues to advance gender diversity goals."

Sandeep Sinha, Chief Executive Officer, TAFE, said, " The TAFE-Deutz facility integrates high levels of automation across manufacturing, testing and logistics, along with vision systems, robotics and cobots for critical assembly functions and reaffirms our ability to manufacture world-class products at scale. We are creating a world-class platform that will deliver exceptional value to customers in India and across international markets. Further, the facility also incorporates a state-of-the art engine testing and an advanced quality laboratory with complete digital traceability to ensure global quality standards."

Dr. Sebastian Schulte, Chief Executive Officer, Deutz, said, “The inauguration of the new DEUTZ engine assembly line in Alwar marks an important milestone in our cooperation with TAFE. It reflects the commitment and strong collaboration of both teams in turning our shared vision into industrial reality.”

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Czech automaker Skoda Auto has produced its one millionth Karoq SUV - a Karoq 1.5 TSI 110 kW finished in Graphite Grey - from its Kvasiny plant.

Since its launch in 2017, the Karoq has been built at the Kvasiny facility, which also produces the Octavia and Kodiaq, and maintains an annual production capacity exceeding 300,000 vehicles. The successor model is scheduled to be unveiled by CY2028.

Andreas Dick, Responsible for Production and Logistics at Skoda Auto, said, “Since production began in 2017, the Skoda Karoq has become an established part of our portfolio and an especially important model for the Kvasiny plant. Reaching the one-million mark reflects the commitment and teamwork of many people over the years. I would like to thank all colleagues in Kvasiny for their dedication, as well as our social partner KOVO for our long-standing, constructive and trusted cooperation.”

The Karoq is sold in around 60 markets, with Germany, the Czech Republic and the United Kingdom serving as its primary markets. The model range includes petrol and diesel engines with power outputs ranging from 85 to 140 kW. As per the company, 73 percent of Karoq buyers select an automatic transmission, while 27 percent choose a manual transmission.

In 2025, the Kvasiny plant manufactured 301,500 vehicles, and production of the Octavia Combi was added to the site in May 2026.

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Zelio E-Mobility, an electric two-wheeler company, has opened its new manufacturing facility in Coimbatore, Tamil Nadu. The company invested up to INR 10 million in the site.

The new plant will support its expansion in South India is spread across 39,000 sqft and will be used for assembly, storage and logistics operations. The facility has an annual production capacity of 60,000 units, increasing the company's total manufacturing capacity to 240,000 units per annum.

Production is expected to start with 24,000–30,000 units annually before scaling to meet market demand. The plant currently employs 30 workers, with plans to add over 100 personnel.

Kunal Arya, Managing Director, Zelio E-Mobility, said, “The launch of our Coimbatore facility marks a major milestone in Zelio E-Mobility’s growth journey. South India represents one of the most promising electric mobility markets in the country, and this expansion strengthens our ability to serve customers, dealers, and partners with greater speed and efficiency. This facility will play a crucial role in supporting our next phase of growth, improving supply chain responsiveness, and reinforcing our commitment to accelerating EV adoption across India.”

For FY2026, Zelio E-Mobility reported its revenue grew 81.8 percent YoY to INR 3.13 billion in FY2025–26, with a revenue CAGR of 121 percent over the past four years.

The company maintains a network of over 400 dealers across 25 states and intends to increase this to over 550 dealerships by FY2027.

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