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.

German luxury car brand Mercedes-Benz India has attained a new production milestone of rolling out its 200,000^th made-in-India car the EQS SUV, from its Chakan facility in Pune, Maharashtra.

The event was attended by Dr Joerg Burzer, Member of the Board of Management of Mercedes-Benz Group AG responsible for Production, Quality & Supply Chain Management, rolled out the 200,000th Mercedes-Benz in India in the presence of Santosh Iyer, Managing Director & CEO, Mercedes-Benz India and Vyankatesh Kulkarni, Executive Director & Head of Operations, Mercedes-Benz India.

It is important to note that Mercedes-Benz India was among the first luxury car brands to set-up production and assembly in India way back in 1994. The company clocked 50,000 units production milestone in 2014 taking a total of 19 years; the next 150,000 units came in a decade (2015-2025).

Interestingly, in the last two years, Mercedes-Benz India produced 50,000 cars, which the OEM stated demonstrates the rapid evolution of India's luxury car market and the increasing aspiration for the Mercedes-Benz brand among Indian customers.

The Chakan facility also boasts several notable distinctions, including being the first market to produce a Mercedes-Maybach (S500) outside Germany in 2015, production of the EQS 580 Sedan in 2022, localisation of a second BEV – EQS 580 SUV. Since 2022, the Chakan facility uses 100 percent green energy for production.

What’s more, Mercedes-Benz has invested over INR 30 billion in India till date with INR 2 billion in 2024 alone.

Dr Joerg Burzer, said, “Mercedes-Benz’s remarkable milestone of 200,000 'Made in India' Mercedes-Benz cars, underlines India’s potential as a key manufacturing hub in the long run. The Indian plant has achieved high level of production agility, manufacturing world-class ICE and EVs under one-roof, underscoring the technical prowess of the team and high level of flexible manufacturing, capable of responding fast to market and customer requirements. The Indian production hub's contribution to our global sustainable manufacturing strategy, through 100 percent renewable energy use, exemplifies our commitment to sustainable manufacturing.”

Santosh Iyer, added, "Mercedes-Benz production facility is the backbone of our Indian operations and has played a critical role in our market success, manufacturing world-class ICE and BEV products for the discerning Indian customers. Mercedes-Benz continues to set new standards in production quality, remaining invested in the market with highest investment by any luxury OEM in India. We will stay invested in our state-of-art manufacturing facility, catering to growing market demand for Mercedes-Benz products in the Indian market."

French tier 1 supplier Valeo is upping its bet on India’s electrification story and has inaugurated its newest facility in Pune, which will focus on the production of the highly integrated 3-in-1 Combo unit (On Board Charger, DC-DC Converter and Power Distribution Unit) for electric vehicles.

The 3-in-1 Combo combines three essential components:

• On-Board Charger, which converts AC power from the grid to charge the high-voltage battery (ranging from 7kW to 22kW).
• DC-DC Converter, which converts high-voltage power to 12V for auxiliary systems and low-voltage battery charging.
• Power Distribution Unit that efficiently distributes power to critical electric vehicle components, including traction and auxiliary loads.

This modular design enhances efficiency by optimizing component sharing between the battery, OBC, and DC-DC units, reducing space, weight and costs while improving overall performance.

The new facility was inaugurated by Xavier Dupont, Valeo Power Division CEO and Group Executive Vice President and Jayakumar G, Group President & Managing Director, Valeo India.

Xavier Dupont, said, “At Valeo, we are committed to supporting xEV growth in India. We offer our clients the latest technologies for safer and more sustainable mobility and by investing in new production capabilities, we are proud to contribute to Make in India. My congratulations and best wishes to the Valeo Power teams for their dedication to drive electrified mobility forward.”

Jayakumar G, stated, "This achievement reflects the strong collaboration between Valeo’s global and India teams in establishing these advanced manufacturing lines. I am pleased that our teams are trained in these new technologies and prepared for the production ramp-up. We sincerely thank our customers for their steadfast support. As India accelerates its xEV transformation, Valeo remains committed to delivering innovative solutions for a sustainable future."

The tier 1 stated that by localising key power electronic components, it will reduce import dependency, optimise supply chain and deliver cost-competitive solutions for OEMs for their EV programmes in India.

The tier 1 supplier has been present in India since 1997 and operates 8 production sites and R&D Centre, employing over 7,000 people across its facilities.

Pune-headquartered two-wheeler and three-wheeler major Bajaj Auto has announced its wholesales for March 2025 and FY2025.

For March, the company witnessed flat growth, selling a total of 369,823 vehicles, which was 1 percent higher YoY, compared to 365,904 units for the same period last year.

In contrast to two-wheeler sales, which were flat at 315,732 units (0.59 percent), the three-wheeler sales grew by 3.98 percent, primarily driven by an 11 percent increase in exports.

On the other hand, for FY2025, the company reported a robust growth of 6.9 percent, selling a total of 4.65 million vehicles, as compared to 4.35 million units last year.

The two-wheeler sales came to 3.98 million, up 6.82 percent YoY. This includes 2.30 million two-wheelers sold in the domestic market, up 2.5 percent YoY and 1.47 million units exported, up 13.3 percent YoY.

The three-wheeler sales came to 668,657 units, which was 7.3 percent higher as compared to 623,010 units sold last year. The domestic sales grew by 3.3 percent YoY, while exports grew at 19 percent YoY, respectively.

Swaraj Tractors partners Mahindra Susten to establish what it claims is Punjab’s largest solar group captive project – a 26 MW solar energy installation in the Bathinda district.

The initiative will supply renewable energy to four manufacturing locations of Swaraj Tractors, which will enable it to scale up the share of renewable energy in production to 50 percent. The project will generate approximately 60 million kWh of renewable energy annually, which will cut down about 54,600 tonnes of CO2 emissions.

Hemant Sikka, President, Farm Equipment Sector, Mahindra & Mahindra, said, “With this groundbreaking solar project, we are taking a pioneering step in introducing green energy at such a large scale in tractor manufacturing for the first time in India. The initiative aligns perfectly with our vision of ‘Transforming Farming and Enriching Lives’, while advancing toward a sustainable future.”

Gaganjot Singh, CEO, Swaraj Division, Mahindra & Mahindra, said, "This solar project is a testament to our unwavering commitment to creating a cleaner, greener future. By leveraging Mahindra Susten’s expertise, we are confident of achieving our renewable energy goals and making a significant contribution to Punjab's evolving energy landscape."

Deepak Thakur, Managing Director and CEO, Mahindra Susten, said, "At Mahindra Susten, our vision is to deliver clean and efficient energy solutions to the Commercial and Industrial (C&I) sector, and we are doing so by developing bespoke power plants tailored to optimally serve each C&I client requirements. We are proud to partner with Swaraj Tractors in their sustainability journey and to bring our renewable energy expertise to Punjab. Together, we aim to drive the adoption of green energy and contribute to India’s transition toward a renewable future."