Driving auto industry momentum: why infrastructure investment should go beyond the highway

2025 has begun brightly for India’s automotive sector. Among the rows of gleaming new models launched at last week’s Auto Expo in New Delhi was the Skoda Kodiaq - the Czech brand’s flagship SUV, which will be built alongside its newest addition, the Kylaq, in Maharashtra for both the Indian and global markets.

With total industry output growing by 11.6% in 2024 and a number of global OEMs relocating production to India, sentiment is robust. A poll of Autocar Professional readers found that two-thirds expect the Indian market to accelerate in 2025. 

Meanwhile Minister Nitin Gadkari has announced four new highway projects for the Delhi region worth a total of Rs. 12,500 crore. This new investment comes after National Highways Authority of India (NHAI) spent Rs. 2,07,000 crore on the construction of national highways in 2023-24. 

With further infrastructure announcements expected in February’s Union Budget, the prospect of improved roads is an exciting one for both the auto industry and Indian motorists.

But for the logistics chain, which the industry relies on to move millions of vital parts and finished vehicles around the country, the picture is sometimes more nuanced.

The last mile matters

For critical logistics, investment in national highways is only part of the puzzle. Improvements to the local roads needed for ‘last mile’ deliveries are just as important.

The logistics industry remains highly price-sensitive, and while volume plays a crucial role, the efficiency of transport operations is key to keeping prices competitive.

The more handling points we have in the logistics chain, the greater the scope for errors, increased costs and variability in performance. By consolidating workflows into larger, centralised logistics hubs, we can streamline processes, exercise better controls and ensure greater consistency across the board.

By minimising the risk of errors, these centralised hubs improve accountability and efficiency and can boost performance across the entire supply chain.

India’s auto industry has enjoyed significant success with larger logistics hubs, and the progress achieved so far could be accelerated further with adequate investment in the country’s secondary roads. These roads are essential for connecting national highways to local markets and distribution centres.

Navigating a web of overcrowded local roads can be an issue that impacts both efficiency and delivery times. Congested routes can lead to delays, increased fuel consumption and a sometimes less-than-ideal customer experience. 

While we should acknowledge the significant advances made with India’s main routes, we also need to look into some of the remaining bottlenecks in the delivery process. It is crucial that we address these challenges head-on, and explore potential solutions to improve last-mile delivery. 

Whether it's optimising delivery routes, leveraging technology for better traffic management or collaborating with local authorities to find feasible solutions, we need to think creatively and proactively.

A practical concern is that carrying out improvement works on a busy commuter road in a built-up area can be incredibly disruptive. Not only does it affect the flow of traffic, but it may also have a significant impact on the local economy. 

Constructing a brand new highway through a less disruptive construction mechanism is an achievable aspiration, and while there are important other factors to consider, such as environmental impact and land acquisition, it's worth weighing these options carefully. 

Support for a successful sector at a decisive moment

Investment in India’s road infrastructure is a proven engine of economic growth, and the auto industry stands to gain more than most. Better roads help more Indians get behind the wheel and make the logistics networks on which manufacturers depend more efficient.

As the world’s third largest car market, domestic demand is strong and exports rose by 9.7% in 2024. Global brands which are closing plants in Europe are opening new facilities in India, including EV and battery factories in Pune and Gujarat.

Improved logistics is the key to maintaining this momentum, as it underpins the competitiveness of Indian-made vehicles on the global stage, ensures consistent domestic deliveries and lays the foundations of the industry’s shift to EV production.

With gradual steps being taken to improve roads and provide more streamlined routes, the entire supply chain is on the right track to becoming significantly more efficient. This will not only benefit the auto industry, but also enhance the overall customer experience.

Vivek Saxena, is the Head of Contract Logistics, Indian SubContinent at CEVA Logistics. The opinions expressed are those of the author alone.