Knowledge Management (KM) has become an essential strategic tool for improving organizational learning, innovation, and competitiveness in small and medium-sized enterprises (SMEs). This study examines the major challenges affecting the implementation of KM in Indian automotive SMEs and proposes suitable measures for strengthening KM practices. A comprehensive review of national and international literature was undertaken to analyse the role of KM in enhancing organizational performance, innovation, and sustainability. The study identifies key barriers to KM adoption, including limited financial resources, inadequate technological infrastructure, lack of skilled personnel, weak organizational awareness, resistance to change, poor knowledge-sharing culture, and regulatory challenges. The findings indicate that effective KM practices can significantly enhance knowledge sharing, decision-making, employee capability, and long-term competitiveness. The study recommends greater investment in digital infrastructure, employee training, leadership commitment, and government support to facilitate systematic KM implementation and improve the sustainable growth and global competitiveness of Indian automotive SMEs.