<h2><strong>Executive Summary</strong></h2><ul><li><p>India’s automotive transition requires a <strong>multi-pathway strategy</strong>, with firms balancing ICE dominance and regulatory shifts by investing in EVs, hybrids, CNG and biofuels.</p></li><li><p>The move from <strong>Industry 4.0 to 5.0</strong> is redefining manufacturing with a sharper focus on human-centricity and sustainability.</p></li><li><p>Limited access to critical minerals remains a <strong>key constraint</strong>, prompting investments in battery recycling, circular value chains and lifecycle accountability.</p></li><li><p>A stable policy architecture, spanning efficiency mandates, recycling regulations and supply chain resilience, is essential for <strong>scaling smart industrial ecosystems</strong>.</p></li><li><p><strong>Companies are embedding</strong> cost transparency, material sustainability and production agility into design, building systems that can adapt to shifting technologies, policies and consumer demands.</p></li></ul>.<p>Global investment in smart manufacturing is accelerating, with India emerging as one of the world’s most dynamic markets. As industrial ecosystems evolve, the focus for businesses is shifting from whether to adopt smart technologies to how to scale them effectively. At a recent IMA India CEO Forum session run in collaboration with the EDAG Group, Rainer Wittich, CEO, EDAG Production Solutions, Arnab Roy, CFO, Maruti Suzuki and Rajat Verma, Founder and CEO of LOHUM, explored the advancements driving the next era of industrial innovation and examined how smart solutions are reshaping production, competitiveness and sustainability across high-impact sectors. </p><h2><strong>EDAG’s Shift to Smart Manufacturing</strong></h2><p>As global manufacturing shifts toward intelligent, adaptive systems, firms like EDAG are evolving from hardware-focused automotive specialists to agile enablers of smart industry. With a legacy in automotive design and production, EDAG is extending its capabilities across sectors such as battery systems, recycling, pharmaceuticals and semiconductors, positioning itself as a digital integrator for tomorrow’s interconnected industrial future. In India, this transformation is anchored in manufacturing engineering, automation and production IT, supported by localised design talent, long-term leadership continuity and deep collaboration with global technology partners such as Nvidia, Siemens and Phoenix Contact. With over two decades in the market, EDAG views India not just as a cost centre but as a parallel innovation hub, delivering solutions for both domestic and global clients. This evolution reflects a broader shift in industrial engineering. Traditional hardware-driven models are giving way to modular, software-defined systems that blend mechanical, mechatronic and digital layers. In response, EDAG is co-developing flexible, plug-and-play production solutions with its ecosystem of partners, scalable from low-volume pilots to fully automated lines. The result is a decentralised, adaptive approach to engineering that balances sectoral versatility with high customisation and precision.</p><h2><strong>Navigating India’s Powertrain Transition</strong></h2><p>India’s automotive sector is undergoing a complex transition across propulsion technologies. Internal combustion engines (ICE) still dominate, making up nearly 94% of passenger vehicle sales, but alternatives are gaining traction. CNG and biofuel vehicles comprise ~18%, diesel remains at ~17% and EVs and hybrids each hover around 3%. In response, companies like Maruti Suzuki have adopted a multi-pathway strategy, simultaneously investing in EVs, hybrids and biofuels to balance affordability, energy security and decarbonisation goals. This shift is being shaped by tightening fuel-efficiency regulations, notably the phased rollout of Corporate Average Fuel Economy (CAFE) norms. India is currently in CAFE 2, with CAFE 3 due in 2027 and CAFE 4 in 2030, each phase mandating progressively higher efficiency thresholds. These top-down mandates will increasingly determine technology choices, making long-term regulatory visibility essential to industrial planning.</p> <p>Electrification is also transforming <em>how vehicles are built</em>. Batteries alone account for up to 40% of an EV’s cost, with 60% of that cost driven by lithium cells, most of which are imported. This makes localisation and cost rationalisation critical. At the same time, the rise of software and data, from mechatronics and connected systems to predictive costing and digital twins, is reshaping production. OEMs are building smart factories that enable granular, real-time decision-making. The road to electrification, therefore, is not a straight leap but a phased transformation, of products, processes and platforms, driven by policy imperatives and digital integration.</p><h2><strong>Human-Centric Innovation and the Shift to Industry 5.0</strong></h2><p>Industry 4.0 was about automation, connectivity and data-driven efficiency. Industry 5.0 builds on this foundation by reintroducing the human, placing purpose, collaboration and sustainability at the centre of innovation. Maruti Suzuki’s transition reflects this shift: from automated assembly lines to a digitally integrated shopfloor where 80% of machines are connected assets generating real-time data. The focus is no longer just on productivity and cost but on empowering people and future-proofing the workforce. Human-centricity is a strategic priority and Maruti is using AI-powered digital work instructions and video-guided modules to train shopfloor operators, simplifying complex tasks without compromising rigour. EDAG, in parallel, is deploying AR/VR-based simulations to accelerate learning and ensure safer, more adaptive training environments. These tools are not just about efficiency but about enhancing human-machine collaboration.</p> <p>As consumer demand for personalisation grows, manufacturers are embedding flexibility into their production systems. Mechatronics, modular assembly lines and software integration are converging to support this shift. Companies are responding by reskilling engineers, adopting design thinking and onboarding talent with cross-functional capabilities. The vision for 2030 is a manufacturing system where humans are not just operators, but interpreters, innovators and decision-makers working alongside intelligent systems.</p><h2><strong>The Critical Mineral Gap</strong></h2><p>India’s smart manufacturing ambitions face a foundational constraint: access to critical minerals such as lithium, cobalt and rare earths, which are essential for batteries, motors, semiconductors and renewables. While China controls over 90% of the global supply chain, this dominance stems not from mineral reserves, but from its superior downstream processing and manufacturing capacity. For context, a single F-16 jet requires 500 kg of rare earth metals, nearly all sourced from China. Despite India’s strong chemical and metallurgical talent base, it remains significantly behind in building this capacity. This dependence is both a geopolitical risk and a production bottleneck. </p><p>In response, firms like LOHUM are advancing circular economy solutions, especially battery recycling, to recover materials such as lithium, cobalt and nickel. Starting with mobile and laptop batteries, LOHUM has scaled its recovery operations, making urban mining more immediately viable than exploiting new reserves like those found in Jammu. As electric mobility expands, closed-loop material systems will become critical for both cost efficiency and resource security. Maruti Suzuki has also moved early, forming a battery recycling joint venture with Toyota. This reflects a broader shift toward lifecycle accountability, as Extended Producer Responsibility (EPR) norms gain traction. Companies will increasingly need to embed recyclability and traceability into design, from digital battery passports to the recovery of black mass. Ultimately, the future of smart industry will rest not only on technological innovation, but also on how strategically firms manage materials across the value chain.</p><h2><strong>Policy, Regulation and Resilience as Enablers of Innovation</strong></h2><p>Smart industry transformation cannot be driven by technology and talent alone; it requires a stable regulatory architecture and long-term capital deployment. While initiatives such as the Production-Linked Incentive (PLI) scheme and the National Critical Minerals Mission have laid initial groundwork, their impact remains limited without institutional depth, policy consistency and follow-through. Three categories of regulation will shape India’s next phase of manufacturing evolution:</p><ul><li><p><strong>Efficiency mandates</strong>, such as the phased rollout of CAFE 3 and CAFE 4 norms, will push OEMs toward cleaner, lower-emission powertrains.</p></li><li><p><strong>Responsibility frameworks</strong>, including EPR, will require companies to embed lifecycle thinking and recycling targets into product design.</p></li><li><p><strong>Strategic resilience policies</strong>, such as dual sourcing norms, secure supply chain standards and public-private R&D frameworks, will gain importance in light of rising geopolitical risk.</p></li></ul><p>Businesses are proactively starting to adapt ahead of such regulatory changes. Maruti has prioritised localisation and vendor ecosystem development to reduce global exposure while LOHUM is building integrated recycling and processing capacity within India. Yet, the innovation ecosystem continues to face a ‘valley of death’, i.e. the gap between early-stage research (TRL 1 to 3) and commercial deployment (TRL 9). Overcoming this will require focused investment in mid-stage R&D, risk-tolerant public funding and stronger industry-academia collaboration. In essence, India’s smart industrial future hinges not only on technological breakthroughs, but on the scaffolding of policy, capital and institutional alignment that enables innovation to scale.</p><h2><strong>Designing for the Future</strong></h2><p>Smart industry innovation hinges on the ability to balance sustainability, affordability and scalability. Firms today are expected not just to adopt cleaner technologies but to design systems that are both economically viable and operationally scalable. In India’s auto sector, consumer adoption of electric or alternate-fuel vehicles is driven by a basic cost equation, the price premium over ICE vehicles versus long-term savings in running costs. Until localisation reduces battery and component costs, mass EV adoption will remain constrained, making hybrid and biofuel vehicles essential bridging technologies in the medium term.</p><p>Simultaneously, companies are rethinking manufacturing economics. Maruti, for instance, is transitioning from legacy costing models to more granular, data-driven approaches such as activity-based and zero-based costing. As connected assets and digital twins become more widespread, production teams can monitor real-time variables, energy use, equipment health and process deviations, enhancing both cost visibility and operational responsiveness.</p><p>The rise of consumer-led customisation is also prompting a redesign of manufacturing systems. Buyers increasingly expect personalised products, even in categories that were once standardised. This has led OEMs to prioritise modularity and flexibility in production lines. EDAG’s work with clients across scales, from manual prototypes to full automation, demonstrates this shift. Sustainability is now being embedded at the design stage through careful material selection, ease of disassembly and integration of circularity features such as recycling-friendly components.</p><p>Looking ahead, the next five years will be defined by concurrent transitions in powertrains, production models and regulatory frameworks. Success will depend not on choosing a singular technological path, but on building agile, resilient systems that can evolve with consumer demand, resource realities and policy shifts.</p>
<h2><strong>Executive Summary</strong></h2><ul><li><p>India’s automotive transition requires a <strong>multi-pathway strategy</strong>, with firms balancing ICE dominance and regulatory shifts by investing in EVs, hybrids, CNG and biofuels.</p></li><li><p>The move from <strong>Industry 4.0 to 5.0</strong> is redefining manufacturing with a sharper focus on human-centricity and sustainability.</p></li><li><p>Limited access to critical minerals remains a <strong>key constraint</strong>, prompting investments in battery recycling, circular value chains and lifecycle accountability.</p></li><li><p>A stable policy architecture, spanning efficiency mandates, recycling regulations and supply chain resilience, is essential for <strong>scaling smart industrial ecosystems</strong>.</p></li><li><p><strong>Companies are embedding</strong> cost transparency, material sustainability and production agility into design, building systems that can adapt to shifting technologies, policies and consumer demands.</p></li></ul>.<p>Global investment in smart manufacturing is accelerating, with India emerging as one of the world’s most dynamic markets. As industrial ecosystems evolve, the focus for businesses is shifting from whether to adopt smart technologies to how to scale them effectively. At a recent IMA India CEO Forum session run in collaboration with the EDAG Group, Rainer Wittich, CEO, EDAG Production Solutions, Arnab Roy, CFO, Maruti Suzuki and Rajat Verma, Founder and CEO of LOHUM, explored the advancements driving the next era of industrial innovation and examined how smart solutions are reshaping production, competitiveness and sustainability across high-impact sectors. </p><h2><strong>EDAG’s Shift to Smart Manufacturing</strong></h2><p>As global manufacturing shifts toward intelligent, adaptive systems, firms like EDAG are evolving from hardware-focused automotive specialists to agile enablers of smart industry. With a legacy in automotive design and production, EDAG is extending its capabilities across sectors such as battery systems, recycling, pharmaceuticals and semiconductors, positioning itself as a digital integrator for tomorrow’s interconnected industrial future. In India, this transformation is anchored in manufacturing engineering, automation and production IT, supported by localised design talent, long-term leadership continuity and deep collaboration with global technology partners such as Nvidia, Siemens and Phoenix Contact. With over two decades in the market, EDAG views India not just as a cost centre but as a parallel innovation hub, delivering solutions for both domestic and global clients. This evolution reflects a broader shift in industrial engineering. Traditional hardware-driven models are giving way to modular, software-defined systems that blend mechanical, mechatronic and digital layers. In response, EDAG is co-developing flexible, plug-and-play production solutions with its ecosystem of partners, scalable from low-volume pilots to fully automated lines. The result is a decentralised, adaptive approach to engineering that balances sectoral versatility with high customisation and precision.</p><h2><strong>Navigating India’s Powertrain Transition</strong></h2><p>India’s automotive sector is undergoing a complex transition across propulsion technologies. Internal combustion engines (ICE) still dominate, making up nearly 94% of passenger vehicle sales, but alternatives are gaining traction. CNG and biofuel vehicles comprise ~18%, diesel remains at ~17% and EVs and hybrids each hover around 3%. In response, companies like Maruti Suzuki have adopted a multi-pathway strategy, simultaneously investing in EVs, hybrids and biofuels to balance affordability, energy security and decarbonisation goals. This shift is being shaped by tightening fuel-efficiency regulations, notably the phased rollout of Corporate Average Fuel Economy (CAFE) norms. India is currently in CAFE 2, with CAFE 3 due in 2027 and CAFE 4 in 2030, each phase mandating progressively higher efficiency thresholds. These top-down mandates will increasingly determine technology choices, making long-term regulatory visibility essential to industrial planning.</p> <p>Electrification is also transforming <em>how vehicles are built</em>. Batteries alone account for up to 40% of an EV’s cost, with 60% of that cost driven by lithium cells, most of which are imported. This makes localisation and cost rationalisation critical. At the same time, the rise of software and data, from mechatronics and connected systems to predictive costing and digital twins, is reshaping production. OEMs are building smart factories that enable granular, real-time decision-making. The road to electrification, therefore, is not a straight leap but a phased transformation, of products, processes and platforms, driven by policy imperatives and digital integration.</p><h2><strong>Human-Centric Innovation and the Shift to Industry 5.0</strong></h2><p>Industry 4.0 was about automation, connectivity and data-driven efficiency. Industry 5.0 builds on this foundation by reintroducing the human, placing purpose, collaboration and sustainability at the centre of innovation. Maruti Suzuki’s transition reflects this shift: from automated assembly lines to a digitally integrated shopfloor where 80% of machines are connected assets generating real-time data. The focus is no longer just on productivity and cost but on empowering people and future-proofing the workforce. Human-centricity is a strategic priority and Maruti is using AI-powered digital work instructions and video-guided modules to train shopfloor operators, simplifying complex tasks without compromising rigour. EDAG, in parallel, is deploying AR/VR-based simulations to accelerate learning and ensure safer, more adaptive training environments. These tools are not just about efficiency but about enhancing human-machine collaboration.</p> <p>As consumer demand for personalisation grows, manufacturers are embedding flexibility into their production systems. Mechatronics, modular assembly lines and software integration are converging to support this shift. Companies are responding by reskilling engineers, adopting design thinking and onboarding talent with cross-functional capabilities. The vision for 2030 is a manufacturing system where humans are not just operators, but interpreters, innovators and decision-makers working alongside intelligent systems.</p><h2><strong>The Critical Mineral Gap</strong></h2><p>India’s smart manufacturing ambitions face a foundational constraint: access to critical minerals such as lithium, cobalt and rare earths, which are essential for batteries, motors, semiconductors and renewables. While China controls over 90% of the global supply chain, this dominance stems not from mineral reserves, but from its superior downstream processing and manufacturing capacity. For context, a single F-16 jet requires 500 kg of rare earth metals, nearly all sourced from China. Despite India’s strong chemical and metallurgical talent base, it remains significantly behind in building this capacity. This dependence is both a geopolitical risk and a production bottleneck. </p><p>In response, firms like LOHUM are advancing circular economy solutions, especially battery recycling, to recover materials such as lithium, cobalt and nickel. Starting with mobile and laptop batteries, LOHUM has scaled its recovery operations, making urban mining more immediately viable than exploiting new reserves like those found in Jammu. As electric mobility expands, closed-loop material systems will become critical for both cost efficiency and resource security. Maruti Suzuki has also moved early, forming a battery recycling joint venture with Toyota. This reflects a broader shift toward lifecycle accountability, as Extended Producer Responsibility (EPR) norms gain traction. Companies will increasingly need to embed recyclability and traceability into design, from digital battery passports to the recovery of black mass. Ultimately, the future of smart industry will rest not only on technological innovation, but also on how strategically firms manage materials across the value chain.</p><h2><strong>Policy, Regulation and Resilience as Enablers of Innovation</strong></h2><p>Smart industry transformation cannot be driven by technology and talent alone; it requires a stable regulatory architecture and long-term capital deployment. While initiatives such as the Production-Linked Incentive (PLI) scheme and the National Critical Minerals Mission have laid initial groundwork, their impact remains limited without institutional depth, policy consistency and follow-through. Three categories of regulation will shape India’s next phase of manufacturing evolution:</p><ul><li><p><strong>Efficiency mandates</strong>, such as the phased rollout of CAFE 3 and CAFE 4 norms, will push OEMs toward cleaner, lower-emission powertrains.</p></li><li><p><strong>Responsibility frameworks</strong>, including EPR, will require companies to embed lifecycle thinking and recycling targets into product design.</p></li><li><p><strong>Strategic resilience policies</strong>, such as dual sourcing norms, secure supply chain standards and public-private R&D frameworks, will gain importance in light of rising geopolitical risk.</p></li></ul><p>Businesses are proactively starting to adapt ahead of such regulatory changes. Maruti has prioritised localisation and vendor ecosystem development to reduce global exposure while LOHUM is building integrated recycling and processing capacity within India. Yet, the innovation ecosystem continues to face a ‘valley of death’, i.e. the gap between early-stage research (TRL 1 to 3) and commercial deployment (TRL 9). Overcoming this will require focused investment in mid-stage R&D, risk-tolerant public funding and stronger industry-academia collaboration. In essence, India’s smart industrial future hinges not only on technological breakthroughs, but on the scaffolding of policy, capital and institutional alignment that enables innovation to scale.</p><h2><strong>Designing for the Future</strong></h2><p>Smart industry innovation hinges on the ability to balance sustainability, affordability and scalability. Firms today are expected not just to adopt cleaner technologies but to design systems that are both economically viable and operationally scalable. In India’s auto sector, consumer adoption of electric or alternate-fuel vehicles is driven by a basic cost equation, the price premium over ICE vehicles versus long-term savings in running costs. Until localisation reduces battery and component costs, mass EV adoption will remain constrained, making hybrid and biofuel vehicles essential bridging technologies in the medium term.</p><p>Simultaneously, companies are rethinking manufacturing economics. Maruti, for instance, is transitioning from legacy costing models to more granular, data-driven approaches such as activity-based and zero-based costing. As connected assets and digital twins become more widespread, production teams can monitor real-time variables, energy use, equipment health and process deviations, enhancing both cost visibility and operational responsiveness.</p><p>The rise of consumer-led customisation is also prompting a redesign of manufacturing systems. Buyers increasingly expect personalised products, even in categories that were once standardised. This has led OEMs to prioritise modularity and flexibility in production lines. EDAG’s work with clients across scales, from manual prototypes to full automation, demonstrates this shift. Sustainability is now being embedded at the design stage through careful material selection, ease of disassembly and integration of circularity features such as recycling-friendly components.</p><p>Looking ahead, the next five years will be defined by concurrent transitions in powertrains, production models and regulatory frameworks. Success will depend not on choosing a singular technological path, but on building agile, resilient systems that can evolve with consumer demand, resource realities and policy shifts.</p>
