The Indian auto industry is one of the largest in the world. The industry accounts for 7.1 per cent of the country's Gross Domestic Product (GDP). The Two Wheelers segment with 80 per cent market share is the leader of the Indian Automobile market owing to a growing middle class and a young population. Moreover, the growing interest of the companies in exploring the rural markets further aided the growth of the sector. The overall Passenger Vehicle (PV) segment has 14 per cent market share.
India is also a prominent auto exporter and has strong export growth expectations for the near future. Overall automobile exports grew 13.01 per cent year-on-year between April-December 2017. In addition, several initiatives by the Government of India and the major automobile players in the Indian market are expected to make India a leader in the 2W and Four Wheeler (4W) market in the world by 2020.
Production of passenger vehicles, commercial vehicles, three wheelers and two wheelers grew at 11.27 per cent year-on-year between April-December 2017 to 21,415,719 vehicles. The sales of passenger vehicles and two wheelers grew by 5.22 per cent and 40.31 per cent year-on-year respectively, in December 2017.
The auto industry is set to witness major changes in the form of electric vehicles (EVs), shared mobility, Bharat Stage-VI emission and safety norms. Electric cars in India are expected to get new green number plates and may also get free parking for three years along with toll waivers@. India's electric vehicle (EV) sales increased 37.5 per cent to 22,000 units during FY 2015-16 and are poised to rise further on the back of cheaper energy storage costs and the Government of India’s vision to see six million electric and hybrid vehicles in India by 2020.
In order to keep up with the growing demand, several auto makers have started investing heavily in various segments of the industry during the last few months. The industry has attracted Foreign Direct Investment (FDI) worth US$ 17.91 billion during the period April 2000 to September 2017, according to data released by Department of Industrial Policy and Promotion (DIPP).
Some of the recent/planned investments and developments in the automobile sector in India are as follows:
The Government of India encourages foreign investment in the automobile sector and allows 100 per cent FDI under the automatic route.
Some of the recent initiatives taken by the Government of India are -
The automobile industry is supported by various factors such as availability of skilled labour at low cost, robust R&D centres and low cost steel production. The industry also provides great opportunities for investment and direct and indirect employment to skilled and unskilled labour.
The Indian automotive aftermarket is estimated to grow at around 10-15 per cent to reach US$ 16.5 billion by 2021 from around US$ 7 billion in 2016. It has the potential to generate up to US$ 300 billion in annual revenue by 2026, create 65 million additional jobs and contribute over 12 per cent to India’s Gross Domestic Product#.
Exchange Rate Used: INR 1 = US$ 0.015 as of January 4, 2018
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 2015-16, Union Budget 2017-18
# - As per the Automotive Mission Plan 2016-26 prepared jointly by the Society of Indian Automobile Manufacturers (SIAM) and government, @ - as per the draft policy on e-vehicles prepared by NITI Aayog, Government of India