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Automobile Industry in India

October, 2012


The Indian automotive industry has emerged as a 'sunrise sector' in the Indian economy. India is emerging as one of the world's fastest growing passenger car markets and second largest two wheeler manufacturer. It is also home for the largest motor cycle manufacturer and fifth largest commercial vehicle manufacturer.

India is the largest base to export compact cars to Europe. Moreover, hybrid and electronic vehicles are new developments on the automobile canvas and India is one of the key markets for them. Global and Indian manufacturers are focussing their efforts to develop innovative products, technologies and supply chains.

Key Statistics

The amount of cumulative foreign direct investment (FDI) inflow into the automobile industry during April 2000 to July 2012 was worth US$ 6,992 million, amounting to 4 per cent of the total FDI inflows (in terms of US$), as per data provided by Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce.

The Indian small and light commercial vehicle segment is expected to grow at 18.5 per cent compound annual growth rate (CAGR) for the next five years, according to a report titled 'Strategic Assesment of Small and Light Commercial Vehicles Market in India' by Frost & Sullivan.

According to the recent data released by the Society of Indian Automobile Manufacturers (SIAM):

  • The cumulative production for April-June 2012 registered a growth of 7.65 per cent over April-June 2011, manufacturing 1,700,675 vehicles in June 2012
  • Passenger vehicles segment grew at 9.71 per cent during April-June 2012, while overall commercial vehicle segment registered an expansion of 6.06 per cent year-on-year (y-o-y)
  • Two-wheelers sales registered a growth of 10.51 per cent during April-June 2012 wherein mopeds, motorcycles and scooters grew by 6.60 per cent, 6.79 per cent and 29.14 per cent, respectively

Major Developments and Investments

  • Mercedes-Benz India plans to increase its investment to Rs 850 crore (US$ 158.88 million) by 2014. The German car maker through its dealer partners has already invested over Rs 480 crore (US$ 89.72 million) in India. The company has also announced the starting of its new, start-of-the-art paint shop that is capable of water-based painting
  • The Volkswagen Group aims to increase output by 10-15 per cent on a €100 million (US$ 126.35 million) investment at its production facilities in Aurangabad and Chakan in Maharashtra
  • Nissan plans to introduce ten new passenger vehicles by the end of March 2016. Nissan India aims to double its vehicle sales in 2012-13 from 33,000 vehicles in 2011-12
  • VE Commercial Vehicles (VECV), the joint venture (JV) between Volvo and Eicher, is readying a whole new range of trucks with new platforms, engines and cabins. VECV has already invested Rs 700 crore (US$ 130.84 million) in the business
  • Toyota Kirloskar plans to increase capacity at its two plants in Bidadi, Karnataka, from 310,000 units to 400,000 units a year. Capacity at the first plant would rise from 90,000 units to 100,000 units, at a cost of Rs 70 crore (US$ 13.08 million) and the second plant's capacity is being increased from 120,000 units to 210,000 units, with an investment of Rs 830 crore (US$ 155.14 million)
  • Blackstone Capital Partners (Singapore) has signed an agreement to acquire 12.5 per cent stake of International Tractors Ltd (ITL) in a structured transaction worth US$ 100 million
  • Mahindra Reva Electric Vehicles has inaugurated a new manufacturing facility in Bommasandra on the outskirts of Bengaluru, Karnataka. The new manufacturing facility has an installed capacity to produce 30,000 vehicles annually
  • Mahindra & Mahindra Ltd has started a technical centre in Troy, Michigan, to leverage on the design and consulting service resources available in the region. The firm intends to use the centre to support company's automotive and tractor engineering requirements in India
  • DC Design's Avanti would be the first sports car to be designed and manufactured in India. The car's prototype has been showcased at the 11th Auto Expo and has been priced at Rs 2.5 million (US$ 46,728)
  • Yamaha Motor, Japan plans to use India as a key global hub for motorcycles and scooters. Yamaha will also use India as one of its four regional procurement bases to source parts for its global two-wheeler operations. The company also plans to expand its sales network across India in order to take its product closer to its customer base particularly in the tier II and tier III cities
  • Bajaj Auto Ltd has entered into an agreement with Kawasaki Heavy Industries, under which Bajaj motorcycles will be assembled and sold in Indonesia through Kawasaki's distribution network as co-branded products
  • Hero MotoCorp Ltd has invested US$ 20 million in the US-based Erik Buell Racing (EBR). The investment will help EBR expand its Milwaukee production capacity and hire more people in its research and development (R&D) team