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Indian Automobile Industry Analysis

March, 2013

Automobiles production increased at a compound annual growth rate (CAGR) of 13.2 per cent over FY05-12, while the export volumes increased at a CAGR of 22.4 per cent.

Strong demand growth due to rising incomes, growing middle class, and the young population is likely to propel India among the world's top five auto-producers by 2015.

India has significant cost advantages; auto firms save 10-25 per cent on operations in India as compared to Europe and Latin America. A large pool of skilled manpower and a growing technology base are some of the leading factors.

The government aims to develop India as a global manufacturing as well as research and development (R&D) hub. There has been a wide array of policy support in the form of sops, taxes and FDI encouragement.

The world's cheapest car (Tata Nano) has directed focus towards the low-income market. Bajaj Auto, Hero Honda and Mahindra & Mahindra (M&M) jointly plan to develop a technology for two-wheelers to run on natural gas. Electric cars are likely to be a sizeable market segment in the coming decade.

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