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Indian Automobiles Industry Analysis

August, 2013

Automobiles production increased at a compound annual growth rate (CAGR) of 12.2 per cent over FY05-13, while the export volumes increased at a CAGR of 19.1 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. Under the Union Budget 2013-14, the government has also proposed to allocate US$ 2.7 billion for Jawaharlal Nehru National Urban Renewal Mission (JNNURM) to bolster sales volumes of Medium and Heavy Commercial Vehicles (MHCV).

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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