Electric vehicles (EVs) are changing how the automobile industry works across the world. For consumers, the shift is often discussed in terms of lower emissions and fuel savings. For governments, it is framed as an industrial and climate opportunity.

But for local automotive MSMEs in India, the EV transition is a far more practical and immediate issue.

This article throws a light on the likely impact of Electric Vehicles on Local Automotive MSMEs, how it affects what they produce, how they earn, and whether they survive the next decade.

Globally, EV adoption is no longer marginal. According to the International Energy Agency, electric car sales crossed 17 million units in 2024, accounting for over 20% of new car sales. India is still behind this curve, but it is moving in the same direction. EV sales in India crossed 2 million units in 2024, driven largely by 2-wheelers and 3-wheelers, which form the backbone of everyday mobility. 

This is a significant shift because India’s automotive economy is the result not only of large manufacturers, but of thousands of local MSMEs – small garages, mechanics, spare parts sellers, battery shops, and service workshops. These businesses are in the proximity of consumers and require daily service income. When technology changes for vehicles, they often are the first to feel the effects. The actual policy challenge is hence not also whether EVs are desirable, but whether local automotive MSMEs can adjust quickly enough to remain relevant.

Why Do EVs Disrupt MSMEs Differently?

India’s automotive MSMEs have changed with the times before. Emission upgrades added to costs but did not change the way that cars were made or serviced. EVs are unlike this as they alter the core structure of the vehicle.

Internal combustion vehicles are dependent on the regular mechanical maintenance of the vehicle – oil changes, engine and clutch repair, exhaust replacement. EVs remove much of this work. With fewer moving parts and less routine maintenance, simple mechanical job dependent MSMEs are left to incur a steady but slow loss of income.

This shift is visible globally.The World Economic Forum points out that EVs reduce complexity in physical machines and increase dependence on electronics and software – benefiting the large technology-heavy companies rather than the small service providers like MSMEs.

However, this shift is more marked in India because of the heavy dependence on 2-wheelers /3-wheelers in the country where there is a huge informal repair economy. India’s automobile market is dominated by 2 and 3 wheelers, which account to more than 80% of the car fleet. NITI Aayog’s report on EV in India 2024 sheds light on the fact that two-wheeler sales alone had crossed 1.5 million in FY2023-24 and three-wheelers play a key role in India’s last-mile transport and urban mobility. As these vehicles become electric, the impact on parts and service centres in local areas is immediate and direct.

India’s Vulnerability: Service-Led MSMEs

In India, most of the local automotive MSMEs are not bank credit-dependent manufacturing units. They are repair and servicing businesses operating on daily cash flow, supported by the frequency with which vehicles must be attended to.

Thereby EVs fairly weaken this model quietly. With fewer moving parts and lower levels of more routine maintenance, mechanics experience fewer service calls per vehicle. Demand for engine parts and filters as well as mechanical replacements drops, and EV batteries – being sealed and controlled by software – are generally replaced rather than repaired.

The impact is not immediate shutdown but it slowly erodes the income. Garages that once relied on repeat servicing have customers less often, and so operations are increasingly not viable for small operators with no financial cushion. The International Labour Organization has expressed concern that green transitions tend to lose jobs in traditional service jobs before replacing them with new ones. In India’s predominantly informal repair ecosystem, this gap risks getting translated in job losses which do not reflect in the headline numbers of EV adoption. In India’s informal repair ecosystem, this disruption translates into off-record job and income losses which is invisible in EV adoption statistics.

What Other Countries Did Right (and Wrong)?

Other countries also faced similar challenges, but there are lessons to be learned from how they responded. 

In Germany, the emergence of EVs strained small automotive suppliers and service companies. The response was about upgrading skills and access update, rather than preserving old models. MSMEs were helped with applied training programs, joint testing facilities, and joining new component categories such as electronics housings and lightweight structures. Many firms survived by shifting sideways rather than exiting from the sector. 

In China, EV took off quickly but the servicing and production of their parts became more concentrated around large manufacturers. Independent MSMEs found it difficult to compete. Whilst this improved efficiency, it reduced space for small repair businesses and local suppliers.

In the United States, the issues of EV adoption evoked a different fault line. Independent garages were locked out of software diagnostics and repair information. This triggered debates around “right to repair,” highlighting the risk of excluding local service businesses from future vehicle ecosystems. 

The common lesson is clear: MSMEs do not necessarily adjust to EV transitions. Where adaptation is supported at an early stage, small firms continue to survive. Where it is ignored, displacement occurs silently and for the long term.

What to do for keeping MSMEs in the EV Ecosystem?

For backing up automotive MSMEs doesn’t mean slowing down EV adoption. It means ensuring that no structural exclusion of local service business.

1. Access to basic EV servicing has to be expanded. Local garages require low-cost diagnostic tools, effective repair procedures and basic high voltage safety training. NITI Aayog reports suggest that strategic scaling of charging and repair infrastructure is essential for the next phase.This enables them to fix routine issues of EVs rather than losing customers entirely.
2. Skill conversion should be practical and short-term. Experienced mechanics don’t need engineering degrees. Focused training in the skills of battery handling, fault detection and safety procedures can help them to remain economically useful.
3. Independent repair MSMEs need to be part of formal service networks. Insurance companies, fleet operators and manufacturers should not restrict themselves to authorised centres. Certified local workshops can cut costs while preserving jobs.

These are small steps, but directly address how Indian MSMEs actually work – through day-to-day work, repeat customers, and skill-based livelihoods.

The EV transition is not a global phenomenon but its economic consequences are intensely local. In India, the real risk is not of closures of factories or facing credit stress but quiet loss of the day to day stuff that keeps the thousands of small automotive MSMEs alive. 

Global experience helps us to see that EVs do not have to kill small businesses but often, unmanaged transitions do. If India accepts early that its automotive MSMEs are service-led rather than factory-led, it will be able to design a transition that is both technologically progressive and socially resilient.  Whatever the EVs do is no longer going to be measured by sales figures, but if there will be a continuing place for local mechanics and garages and service businesses in the mobility systems of the future or not.