The Indian automobile sector is one of its most vibrant industries. The industry accounts for 22 per cent of the country's manufacturing gross domestic product (GDP). It comprises passenger cars, two-wheelers, three-wheelers and commercial vehicles and is currently the seventh-largest in the world with an average annual production of 17.5 million vehicles, of which 2.3 million are exported. The Indian auto market has the potential to dominate the global auto industry, provided a conducive environment is created for potential innovators to come up with new pilot projects.
The next few years are projected to show solid but cautious growth due to improved affordability, rising incomes and untapped markets. All these open up an opportunity for automobile manufactures in India. In addition, with the 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 of US$ 145 billion in 2016, according to the Automotive Mission Plan (AMP) 2006-2016.
The automobile industry produced a total of 1,861,849 vehicles including passenger vehicles, commercial vehicles, three-wheelers and two-wheelers in April 2014 as against 1,687,243 in April 2013, registering a growth of 10.35 percent over the corresponding month of 2013. The growth is mostly attributed to the rise in two-wheeler production.
Two-wheeler sales registered growth of 11.67 percent in April 2014 over April 2013. Within this segment,scooters, motorcycles and mopeds grew by 26.08 percent, 8.06 percent and 0.23 percent respectively.
In April 2014, passenger car sales stood at 1,786,899 units while utility vehicles sales stood at 525,942 units, as per data from Society of Indian Mobile Manufacturers (SIAM). Export of utility vehicles showed an improvement of 298 percent with 41,550 units.
Tractor sales in the country will grow at a compound annual growth rate (CAGR) of 8-9 per cent in the next five years making India a high-potential market for international brands such as Kubota, Case New Holland, AGCO, Same Deutz Fahr and John Deere, according to JD Power Asia Pacific's maiden pilot study on the Indian tractor market.
The cumulative foreign direct investment (FDI) inflows into the Indian automobile industry during the period April 2000 -May 2014 was recorded at US$ 9,885.21 million, according to data published by Department of Industrial Policy and Promotion (DIPP).
Some of the recent major investments in the automobile industry in India are as follows:
SIAM and the Automotive Component Manufacturers Association of India (ACMA) are two apex bodies appointed by the Government of India to work for the development of the automobile industry in India.
India has a well-established Regulatory Framework under the Ministry of Shipping, Road Transport and Highways in which SIAM plays an important role. Also, ACMA's active involvement in trade promotion, upgrade in technology, quality enhancement and collection and dissemination of information has made the body a vital catalyst for the industry's development.
The Indian government encourages foreign investment in the automobile sector and allows 100 per cent FDI under the automatic route. It is a fully delicensed industry and free imports of automotive components are allowed. Moreover, the government has not laid down any minimum investment criteria for the automobile industry and has formulated the Automotive Mission Plan for the period 2006-2016 which aims to accelerate and sustain growth in this sector. The plan also aims to double the contribution of the automotive sector to the country's GDP by taking its turnover to US$ 145 billion and providing additional employment to 25 million people by 2016.
Faster economic growth coupled with the government's policies is likely to drive volumes and revive the Indian automobile sector. A fall in interest rates and stable fuel prices are expected to create an environment conducive for growth in this industry. Many foreign companies have alsostarted to show their presence in India leading to a very competitive automobile market in the country, which augurs well for the sector's growth.
It has been predicted by IHS Automotive, a global market information provider that India will become the third largest automotive market in the world by 2016 ahead of Japan, Germany and Brazil, riding on its domestic automotive sales.
Exchange Rate Used: INR 1 = US$ 0.0166 as on July25, 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