This research systematically explored and analyzed the critical connections between the challenges of implementing circular supply chain (CSC) practices and the influence of Industry 4.0 technologies on CSC performance. A comprehensive investigation was conducted to demonstrate the impact of CSC adoption on advancing the circular economy (CE). The primary focus of this study was to identify and classify the significant barriers to CSC implementation, particularly in the context of their potential effects on the adoption of such practices within automotive companies. CSC adoption is crucial, as it aimed at sustainable growth so as to increase the overall performance while emphasizing on environmental impact by deploying practices such as, reduce, reuse, recycle, remanufacture, refurbish, etc. Finding a strategic framework for the study and analysis of CSC implementation challenges in small and medium-sized firms (SME) that impede sustainability in the Indian sector has been the target of the research effort. To identify a deeper knowledge of CSC implementation in the Indian context, obstructions to CSC implementation and expected performance outcomes have been identified and analyzed based on a thorough research of the literature. The primary focus of the research is on the performance outcomes and barriers associated with implementation of CSC in India’s small medium. This study focuses on identifying and prioritizing the barriers to the adoption of circular supply chains (CSC) in the automotive industry, with sustainability as a central consideration. Using the analytic hierarchy process (AHP), a prominent multi-criteria decision-making (MCDM) method, the research systematically categorized these obstacles. The findings highlight the importance of recognizing and ranking critical challenges to CSC implementation through pairwise comparisons and scoring, along with assessing their impact on CSC performance metrics. This research will identify a number of significant challenges that need to be addressed in order to successfully implement CSC practices that strive for total sustainability in automotive manufacturing companies, not only in India but also internationally.