Moving Manufacturing Out of China: Why India is the New Luxury Hub (2025)

Do not index

Moving manufacturing out of China has become a defining trend, with over 90% of North American manufacturers already relocating some production in the past five years. According to Boston Consulting Group, this shift has created remarkable opportunities for India, which saw its exports to the U.S. surge by $23 billion — a 44% increase from 2018 to 2022.

In fact, India’s emergence as a luxury manufacturing hub is particularly noteworthy. With its luxury retail market expected to reach $14 billion by 2032 and the country minting a new billionaire every five days, global brands are recognizing India’s potential. The nation has already overtaken China to become the world’s second-largest diamond market, demonstrating its growing prominence in the luxury sector.

We’ll explore why companies are leaving China, examine India’s strategic advantages in luxury manufacturing, and analyze how global brands are successfully navigating this transition. We’ll also address the key challenges and considerations for businesses planning similar moves.

Why Companies Are Leaving China

The global manufacturing landscape is undergoing a seismic shift as companies increasingly seek alternatives to China’s once-dominant position. This exodus from the world’s factory floor isn’t happening on a whim — it’s driven by specific, measurable factors that have fundamentally changed the risk-reward equation for businesses.

Trade war and tariff pressures

The escalating trade war between the United States and China has created unprecedented tariff barriers, significantly impacting profit margins. The US has imposed staggering 145% tariffs on Chinese goods [1], while China has retaliated with 125% duties on American imports [1]. For luxury brands, these tariffs have shattered expectations of a US-driven market recovery that was anticipated for 2025 [2].

The consequences are far-reaching:

Bernstein analysts reversed their 2025 luxury sector forecast from 5% growth to a 2% decline [2]

HSBC downgraded its projection from 5% growth to flat sales [2]

Luxury brands face the double challenge of wealth destruction and deteriorating consumer sentiment [2]

Furthermore, Chinese manufacturers have begun exposing how luxury brands get their products made in China for a fraction of retail prices, breaking confidentiality agreements as tensions escalate [3].

Geopolitical risks and supply chain disruptions

Beyond tariffs, companies face mounting geopolitical uncertainties when manufacturing in China. The COVID-19 pandemic exposed critical vulnerabilities, with China’s strict zero-COVID policy causing factory closures and severe supply chain disruptions [4]. Additionally, many businesses worry about intellectual property protection, with instances of IP theft and forced technology transfers making companies wary of sharing proprietary knowledge [5].

Meanwhile, Chinese political movements and regulatory changes have created an increasingly challenging business environment. More than 50% of American firms in China reported barely breaking even or suffering losses in 2023 [5], while 44% specifically cited Sino-American trade tensions as the primary cause [5].

The rise of the China Plus One strategy

Consequently, the “China Plus One” (C+1) strategy has become essential for business continuity. This approach, which gained initial traction between 2014–2015 due to rising labor costs [4], has evolved from a contingency plan to a strategic imperative.

Rather than simply pursuing “China plus one,” companies are now navigating a “China plus many” world [6]. Despite China’s continued status as a manufacturing powerhouse (accounting for 30% of global manufacturing output in 2022 [7]), US imports from China have declined from their 2018 peak of 22% to 11.5% as of June 2024 [8].

In response, foreign direct investment into China turned negative for the first time on record in the third quarter of 2023 [8], signaling that companies are divesting at a faster rate than they’re investing. At the same time, 30% of American corporations are contemplating or already relocating operations elsewhere — twice the exit rate seen in 2020 [5].

India’s Strategic Advantages for Luxury Manufacturing

As luxury brands evaluate alternatives to Chinese manufacturing, India stands out as a compelling destination. The subcontinent offers unique advantages that are increasingly attracting high-end brands looking to diversify their production footprint.

Government incentives and Make in India initiative

India’s government has rolled out an impressive array of incentives specifically designed to attract luxury manufacturers. The Production Linked Incentive (PLI) scheme offers companies 4–6% cashback on incremental sales for five years, with the leather and footwear sector — critical for luxury goods — receiving special attention. The Make in India initiative has likewise established dedicated investment corridors in Maharashtra and Gujarat that cater to premium manufacturing.

For luxury brands specifically, the government has introduced streamlined customs procedures that reduce clearance times by 65% compared to 2018 levels. Moreover, foreign companies can now operate with 100% ownership in most manufacturing segments without requiring special permissions, removing a significant barrier that previously deterred premium brands.

Labor cost and workforce demographics

India’s labor advantages extend beyond mere cost savings. While average manufacturing wages remain approximately one-third of China’s (₹15,000 vs ₹45,000 monthly), the true advantage lies in the skilled artisan tradition. The country boasts over 7 million craftspeople specialized in techniques like hand embroidery, leather working, and jewelry making — precisely the skills luxury manufacturing demands.

Furthermore, India’s demographic dividend provides sustainable workforce advantages. With 65% of its population under 35 years old, the country offers luxury brands access to a growing talent pool. This contrasts sharply with China’s aging workforce challenge where the median age has reached 38 years and continues to rise.

Improving infrastructure and logistics performance

Once a significant deterrent, India’s infrastructure has undergone remarkable transformation. The Dedicated Freight Corridor has reduced transportation times between major manufacturing hubs and ports by 40%, while the implementation of the Goods and Services Tax (GST) has eliminated interstate tax complications that previously hindered efficient supply chains.

Additionally, the country has established seven specialized luxury manufacturing clusters with integrated facilities for material sourcing, production, and quality control. These clusters feature reliable power supply, advanced wastewater treatment, and enhanced security measures — prerequisites for luxury production that were previously lacking. Notable examples include the Luxury Textile Park in Surat and the Premium Leather Complex in Kanpur, both featuring state-of-the-art facilities tailored to high-end manufacturing.

How Global Brands Are Making the Shift

Luxury brands are actively moving manufacturing out of China to India, with remarkable success stories emerging across the sector. This strategic shift demonstrates how companies are implementing diversification while capitalizing on India’s unique manufacturing ecosystem.

Case studies: Rado, Bulgari, and LVMH

The Swiss watchmaker Rado exemplifies this transition, having transformed India into its largest global market, outperforming China despite global challenges [15]. With approximately 33 stores across India, Rado’s success extends beyond major cities into smaller towns, where demand continues to grow rapidly [15]. Similarly, Bulgari is expanding its footprint in India through both physical stores and digital channels. The brand recently launched its first digital boutique in partnership with Tata CLiQ Luxury [16], recognizing that brands with both online and offline presence will be the “winning ones” in India [16].

LVMH, the luxury conglomerate, has intensified its commitment to Indian manufacturing through multiple initiatives. Notably, since 2018, LVMH has participated in Utthan, supporting Mumbai’s embroidery sector and surveying 3,000 karigars (embroidery workers) to guarantee living wages and healthcare access [17]. The group’s L Catterton investment arm now ranks India as a “high-priority market” above several other Asian countries [7].

India’s growing role in fashion and accessories

India’s luxury market is undergoing remarkable transformation, currently valued at $8.5 billion and projected to grow to $85–90 billion by 2030 [8]. The country has emerged as the third largest luxury market in Asia [5], with global brands increasingly acknowledging Indian craftsmanship publicly.

Fashion houses like Dior have begun highlighting their Indian production, showcasing workshops in southern India where fabric is handloomed [18]. Remarkably, several luxury brands are developing India-specific products — Bulgari launched an India-exclusive Mangalsutra, Louis Vuitton debuted a ‘Rani Pink’ footwear collection, and Jimmy Choo released a Diwali capsule collection [19].

Reshoring and diversification strategies in action

Presently, most luxury brands enter India through strategic partnerships rather than establishing exclusive brand outlets. Joint ventures with established local retailers provide quicker market access and increased customer touchpoints [5]. Concurrently, many brands are adopting a “China plus many” approach rather than simply “China plus one” [20].

This diversification is yielding positive results. In 2023–2024, over 300 international fashion brands planned store openings in India [21], with luxury giants like Gucci, Cartier, and Louis Vuitton launching boutiques in Mumbai’s new Jio World Plaza Mall [19]. For India, this manufacturing shift represents both economic opportunity and cultural recognition, as high-end brands increasingly celebrate the country’s artisanal heritage on the global stage.

Conclusion

Manufacturing’s great migration from China marks a defining moment for luxury brands worldwide. India stands ready to seize this opportunity, backed by government support, skilled artisans, and improving infrastructure. The success stories of Rado, Bulgari, and LVMH prove that luxury manufacturing in India isn’t just viable — it’s profitable.

Certainly, challenges exist. Infrastructure gaps need attention, workforce skills require development, and some product categories face higher barriers to entry. However, brands that have made the transition demonstrate that these hurdles are manageable with proper planning and local partnerships.

The luxury market transformation in India, projected to reach $85–90 billion by 2030, presents unprecedented opportunities for global brands. At Maryadha, we bridge the gap between visionary luxury brands and India’s finest premium manufacturers, helping you find the right fit whether you seek unmatched craftsmanship, sustainable sourcing, or a strategic partner in this changing global landscape.

Above all, India’s rise as a luxury manufacturing hub represents more than just an alternative to China — it signals the dawn of a new era where traditional craftsmanship meets modern luxury. Companies that recognize and act on this shift now will gain significant advantages in the years ahead.

At Maryadha, we bridge the gap between visionary luxury brands and India’s finest premium manufacturers. Whether you’re seeking unmatched craftsmanship, sustainable sourcing, or a strategic partner in a changing global landscape — we help you find the right fit. Let us connect you to a new era of reliable, refined, and responsible manufacturing.

✨ Discover the difference. Partner with Maryadha.