European Carmakers Explore Manufacturing in India as German Firms Plan Investments

Several European companies have expressed interest in investing in India, with multiple carmakers exploring manufacturing opportunities in the country, Union Commerce and Industry Minister Piyush Goyal stated during an official visit.

Speaking to reporters, the minister noted that European manufacturing faces heavy regulatory burdens, such as the carbon border adjustment mechanism (CBAM) and deforestation rules implemented by the European Union. Consequently, European companies are looking for trusted partner countries where production costs are lower. Goyal highlighted potential growth in sectors including healthcare, pharmaceuticals, precision engineering, aerospace, defence, shipbuilding, and ship repairing.

Established German carmakers such as Volkswagen, Mercedes-Benz, BMW, and Audi, alongside Czech automaker Skoda, already maintain operations in India. Goyal stated that India currently exports about one million cars and expects cars made in India to enter the European market soon. Without naming a specific firm, he mentioned that a company with a turnover of about 4 billion Euros in India is planning to scale up to 10 billion Euros.

During bilateral meetings, German companies indicated plans for substantial investments. Ambassador of India to Germany Ajit Gupte stated that German companies announced investments totaling USD 7.4 billion over the past two and a half years. Over 2,000 German companies currently operate in India, making Germany the tenth largest investor in the country. India received USD 495 million in foreign direct investment (FDI) from Germany in 2025-26, contributing to a cumulative FDI of USD 15.84 billion between April 2000 and June 2026.

Discussions between India and the EU also focused on the proposed free trade agreement (FTA), which is expected to be signed by the end of the year and come into force in the first quarter of 2027. Goyal described the FTA as a comprehensive partnership providing certainty, continuity, and predictability for supply chains and bilateral trade.

Addressing concerns regarding ease of doing business, Goyal mentioned that the Indian government is implementing systemic changes, including decriminalising minor offences and removing or easing approximately 40,000 compliance burdens. Katherina Reiche, Federal Minister for Economic Affairs and Energy of Germany, previously suggested doubling bilateral trade and further reducing red tape.

Regarding the EU's CBAM policy, Goyal stated that India and the European Union have reached an amicable settlement. He added that India is actively decarbonizing its economy, which will provide an advantage as competitors absorb carbon tax costs. Furthermore, Goyal pointed out employment opportunities for Indian youth in Germany, noting that German companies are looking to hire thousands of workers in sectors such as technical manpower, healthcare, and nursing, with plans to introduce German language and culture training programmes.

"The increasing interest of European manufacturers and German firms in India reflects a structural shift in global supply chains. As regulatory and operational costs rise in Europe, India presents a viable manufacturing and export base supported by domestic market demand and improving trade frameworks. For businesses and entrepreneurs, this signals long-term opportunities in high-tech manufacturing, engineering, and bilateral trade collaboration." — Dr. Shishir Gupta, Founder & CEO, StartupLanes