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Automobile Industry in India

January, 2013


The Indian automotive industry has emerged as a 'sunrise sector' in the Indian economy. India is being deemed 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 the fifth largest commercial vehicle manufacturer.

India is expected to become the third largest automobile market in the world. Ford is looking at India as a major export hub, as per Mr Joginder Singh, President and Managing Director, Ford India.

By 2020, the luxury car segment is estimated to be around three per cent of the overall passenger car market in India. So, there is huge opportunity for growth. India is going to be one of the biggest markets for us, worldwide, according to Tomas Ernberg, Managing Director, Volvo Auto India.

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 November 2012 was worth US$ 7,518 million, amounting to 4 per cent of the total FDI inflows (in terms of US$), as per data published by Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce.

India's scooter and motorcycle manufacturers have registered 4 per cent growth during April-November 2012, according to the recent data released by the Society of Indian Automobile Manufacturers (SIAM). Moreover, the 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).

The Indian small and light commercial vehicle segment is expected to more than double by 2015-16 and to grow at 18.5 per cent compound annual growth rate (CAGR) for the next five years, according to a report titled, 'Strategic Assessment of Small and Light Commercial Vehicles Market in India' by Frost & Sullivan.

Major Developments & Investments

  • Volvo Group plans to invest Rs 3,800 crore (US$ 710.28 million) in India over the next few years. Of this, Rs 1,800 crore (US$ 336.45 million) would be invested in its joint venture (JV) with Eicher Motors. Volvo also aims to export about 30 per cent of the capacity at its Indian engine plant it plans to open in Pithampur, Madhya Pradesh in 2013, as it looks to leverage costs from India operations
  • Honda Car India, the wholly-owned subsidiary of Honda Motor Co, plans to set up a greenfield diesel engine factory at its second industrial location in Rajasthan
  • Jaguar Land Rover (JLR) will incur capital expenditure worth US$ 3.26 billion per year over the medium term mainly for product development, according to Crisil. In addition, Tata Motors has started assembling the Jaguar XF at its new facility in Chakan near Pune, Maharashtra
  • The research and development (R&D) team of Fiat India will assist Chrysler to design and develop the smallest Jeep, to be launched globally by mid-2014. The Italian company has also commissioned an R&D set-up, Chrysler India Automotive Pvt Ltd, in Chennai
  • Hero MotoCorp has started construction of its fourth manufacturing plant and a new Global Parts Centre (GPC) at Neemrana, Rajasthan. The project will attract an investment of Rs 550 crore (US$ 102.80 million) and both facilities are expected to be operational by FY 2013-14
  • Mahindra & Mahindra (M&M) plans to invest US$ 900 million over the next four years in SsangYong Motor for developing three new vehicles and six engines. The investment would be from internal accruals, fresh equity and debt, as per Mr Pawan Goenka, President (Automotive & Farm Equipment sectors), M&M. The firm plans to buy Navistar's 49 per cent stake in the truck and engine making joint ventures (JV) - Mahindra Navistar Automotives Ltd and Mahindra Navistar Engines Pvt Ltd - for about US$ 31.95 million
  • Luxury carmakers like BMW, Audi are planning more 'Made in India' products to increase the number of offerings in the sub Rs 2.5 million (US$ 46,729) category to expand market. The luxury carmakers are planning to tap the younger customers with lower price points
  • VE Commercial Vehicles Ltd (VECV), a joint venture between Sweden's Volvo Group and homegrown Eicher Motors, will invest Rs 1,200 crore (US$ 224.30 million) by 2014 for expanding production capacity and developing new products
  • Luxury car brands in India have registered a growth of 12.5 per cent during January-November 2012 period. The luxury car market in India is expected to reach 150,000 units by 2020, as per Mr Tomas Ernberg, Managing Director (MD), Volvo Auto India