India’s automotive sector faces muted FY25 growth, rising EV talent premiums, and performance system challenges, but remains positioned for double-digit recovery by FY26 through strategic innovation, upskilling, and smarter talent and compensation strategies.
05 Jul 2025 | 4546 Views | By Neelesh Gupta & Yagesh Singhania, Deloitte India
Over the past three years, the Indian automotive industry has demonstrated remarkable resilience by navigating global challenges such as supply chain disruptions, semiconductor shortages and the rapid shift towards electric vehicles (EVs). Post-pandemic recovery in FY22 saw a 29 percent growth surge, driven by pent-up demand. This momentum tempered down ...
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Over the past three years, the Indian automotive industry has demonstrated remarkable resilience by navigating global challenges such as supply chain disruptions, semiconductor shortages and the rapid shift towards electric vehicles (EVs). Post-pandemic recovery in FY22 saw a 29 percent growth surge, driven by pent-up demand. This momentum tempered down to ~10 percent in FY23 due to cost pressures but rebounded to ~15 percent in FY24, fueled by EV investments and tech-driven manufacturing.
For FY25, despite the high base effect in FY24, sales improved across all segments except for Commercial Vehicles (CV). According to data released by the Society of Indian Automobile Manufacturers (SIAM), overall wholesale sales by the automotive industry grew by 7.3 percent in FY25, approximately half of the previous FY growth.
While FY25 for the Indian automotive sector reflects short-term adjustments to global volatility and the EV transition, long-term prospects remain robust with India’s automotive industry projected to reclaim double-digit growth by FY26 as structural challenges ease.
Government incentives, smart manufacturing and innovation and talent retention will remain critical to sustaining India’s leadership in the global automotive revolution.
The Indian automotive industry’s wholesale growth in FY25
(% change Y-o-Y) Source: SIAM
Battery vs. brakes: How EV expertise outpaced traditional roles in India’s salary increment race
The Indian automotive industry has witnessed dynamic salary trends over the past three years, mirroring its post-pandemic recovery and EV revolution. Between FY22 and FY24, average annual salary increments ranged between 10 percent to 12 percent, outpacing the national average of 7 percent to 9 percent across sectors.
Post 2021, auto-makers and suppliers prioritised EV and tech expertise, driving double-digit pay hikes (12 percent to 15 percent) for roles in battery engineering, Artificial Intelligence (AI)/Machine Learning (ML) and automation. Skilled technicians and Research &Development (R&D) professionals saw a 20 percent to 25 percent salary jump in competitive hiring cycles, fueled by talent wars between legacy manufacturers and EV startups.
However, traditional internal combustion engine (ICE) roles saw modest increments (7 percent to 9 percent), reflecting the sector’s strategic pivot. Per Deloitte’s research, average compensation cost for EV talent is approximately 32 percent higher than ICE talent at the same level and experience. Therefore, for automotive companies that are operating both in ICE and EV, harmonising a meritocratic culture across both segments by balancing equitable performance standards with strategic prioritisation of EV talent, remains a critical challenge.
For FY25, as growth projections remain muted (7 percent industry growth), salary increments are expected to hover around 10 percent (with increment range between 8 percent to 15 percent), with EV and digital roles continuing to command premiums. As auto-makers balance cost pressures with talent demands, the focus on meritocracy and upskilling will define compensation strategies in India’s rapidly evolving automotive landscape.
Automotive producers in India distributed a salary increase of 10.1 percent for FY25 as compared to 10.5 percent for FY24 which represents a 40bp drop from last year. This drop is largely on account of muted industry growth, lower average attrition and uncertain economic outlook, especially with respect to exports. Despite the drop, the automotive industry continues to outpace the India Inc. salary increment number, which averages at 8.8 percent for FY25.
A compression paradox: Performance ratings in the Indian automotive industry
A recurring trend across automotive manufacturers is the persistent skew in performance ratings, with approximately 90 percent to 95 percent of employees rated in the top three brackets (on a 5-tier rating scale), while fewer than 10 percent fall into the bottom two categories. Strikingly, this imbalance persists regardless of business outcomes, i.e. whether the organisation outperforms targets or struggles with profitability.
Such performance-rating inflation dilutes companies' ability to meaningfully differentiate salary increments between high performers and average contributors. With limited annual increment budgets, organisations struggle to allocate disproportionate rewards to top talent, especially those driving innovation or revenue growth.
The result? A “compressed” reward structure where marginal differences in pay hikes fail to reflect true performance disparities, weakening the link between meritocracy and compensation. As competition for EV and tech talent intensifies, this trend risks eroding employee motivation and exacerbating attrition among high-potential employees seeking recognition. In essence, overhauling rigid rating systems and aligning them with strategic priorities is no longer optional but is critical for sustaining growth in a bifurcated industry.
The great attrition differential: Why automotive attrition is not a one-size-fits-all crisis
While the overall automotive industry’s average attrition is going down, the story reveals a stark functional divide, with rates ranging from 3 percent to 5 percent in legacy functions such as production, supply chain and quality to over 15 percent in EV R&D and software engineering.
While traditional functions face lower turnover due to stable demand, high-growth areas such as battery tech and autonomous systems grapple with acute talent shortages and aggressive poaching. This disparity underscores the futility of relying on ‘’average’’ attrition metrics. The overall attrition number still goes down. Legacy functions such as production, quality, and supply chain contribute to over 50 percent of the total employee headcount.
Despite a slowdown in overall attrition, attrition for key talent continues to increase across functions. Key talent in any company typically constitutes top performers, top potential employees and employees in critical roles, representing 20 percent to 25 percent of total white-collar headcount. Key talent attrition continues to be around 1.5X of average attrition in the automotive industry.
Therefore, companies must adopt a function and talent-specific lens when analysing skill gaps, compensation parity and career mobility to tailor retention strategies. Retaining top talent and value drivers will be a critical priority for companies in the coming performance year through an innovative balance of monetary and non-monetary initiatives. Ignoring this focus risks misallocating resources, leaving critical teams vulnerable and stalling innovation in a hyper-competitive market.
Attrition trends in the automotive industry (Average vs Key Talent Attrition)
Source: Deloitte Talent Outlook Study
Driving Forward: Balancing innovation and talent in India’s automotive sector
As the Indian automotive industry navigates the crossroads of muted growth in FY25 and transformative electrification, its long-term trajectory hinges on strategic agility. While short-term headwinds, global volatility, compressed reward structures and attrition in critical roles demand immediate attention, the sector’s future remains electrified by innovation.
To reclaim double-digit growth by FY26, auto-makers must accelerate investments in EV R&D, smart manufacturing and talent upskilling programs while addressing systemic challenges such as performance-rating inflation and the widening compensation gap between legacy and emerging roles. Equally vital will be the adoption of nuanced talent strategies: reimagining retention for high-value talent through career mobility, equitable meritocracy and tailored incentives.
Ultimately, the industry’s success will depend on its ability to balance structural reforms, from overhauling rigid performance frameworks to bridging the attrition divide, with a relentless focus on innovation. As India shifts gears from incremental adjustments to strategic reinvention, the automotive sector stands poised to drive not just economic growth but a sustainable, tech-driven mobility revolution, cementing its role as a global powerhouse in the automotive renaissance.
Neelesh Gupta is Partner at Deloitte India and Yagesh Singhania is Director at Deloitte India. Views expressed are the author's personal.