India represents one of the world’s largest car markets. Easy availability of finance and rising income levels are encouraging the middle class population to choose from the vast range of passenger vehicles.
The Indian auto industry has been recording tremendous growth over the years and has emerged as a major contributor to India’s gross domestic product (GDP). The industry currently accounts for almost 7 per cent of the country’s GDP and employs about 19 million people both directly and indirectly.
In addition, with Government’s backing and a special focus on exports of small cars, multi-utility vehicles (MUVs), two and three wheelers and auto components, the automotive sector’s contribution to the GDP is expected to double reaching a turnover worth US$ 145 billion in 2016, according to the Automotive Mission Plan (AMP) 2006–2016.
The auto industry produced a total 1.81 million vehicles, including passenger vehicles, commercial vehicles, three wheelers and two wheelers in February 2014 as against 1.73 million in February 2013, registering a growth of 4.41 per cent over the same month last year. The increase continues to be on account of growth in two wheelers production. Moreover, the overall domestic sales during April–February 2014 grew marginally by 2.68 per cent over the same period last year.
The passenger vehicles production in India is expected to reach 10 million units by 2020–21. The industry is estimated to grow at a compound annual growth rate (CAGR) of 13 per cent during 2012–2021. In addition, the industry is projected to touch US$ 30 billion by 2020–21, according to data from Automotive Component Manufacturers’ Association (ACMA).
The cumulative foreign direct investment (FDI) inflows into the Indian automobile industry during the period April 2000 to January 2014 was recorded at US$ 9,344 million, an increase of 4 per cent to the total FDI inflows in terms of US$, according to data published by Department of Industrial Policy and Promotion (DIPP), Government of India.
The overall automobile exports grew by 6.39 per cent during April–February 2014. Passenger vehicles, three wheelers and two wheelers registered growth at 6.44 per cent, 16.40 per cent and 5.41 per cent respectively, compared to the same period last year.
The used cars market in India is anticipated to grow at a CAGR of 16 per cent during 2013–17, highlighted the RNCOS report titled, ‘Booming Used Car Market in India Outlook 2017’.
Furthermore, India is expected to emerge as a centre for producing compact superbikes. Several global and Indian bike makers plan to utilise India's mass production base of 16 million two wheelers to roll out sports bikes in the 250cc capacity.
The Interim Budget 2014-15 added some incentives to the auto industry. To give relief to the automobile industry, the excise duty has been reduced till June 30, 2014 as follows:
The other incentives from Union Budget 2013–14 are as follows:
The Government of India allows 100 per cent FDI in the automotive industry through automatic route.
The vision of AMP 2006–2016 expects India, “to emerge as the destination of choice in the world for design and manufacture of automobiles and auto components with output reaching a level of US$ 145 billion; accounting for more than 10 per cent of the GDP and providing additional employment to 25 million people by 2016.”
Exchange Rate Used: INR 1 = US$ 0.01657 as on April 11, 2014
References: Media Reports, Press Releases, Department of Industrial Policy and Promotion (DIPP), Automotive Component Manufacturers Association of India (ACMA), Society of Indian Automobile Manufacturers (SIAM), Union Budget 2014-15