By 2020, India's share in global passenger vehicle market is expected to double to 8 per cent from 4 per cent over 2010–11. Automobiles production increased at a compound annual growth rate (CAGR) of 11.8 per cent over FY 05–13. Passenger vehicles was the fastest growing segment, representing a CAGR of 12.9 per cent.
Strong growth in demand due to rising income, growing middle class, and a young population is expected to drive India among the world’s top five auto manufacturers by 2015. Growth in export demand is also set to accelerate. Automobile export volumes increased at a CAGR of 19.1 per cent during FY 05–13. India has significant cost advantages; auto firms save 10–25 per cent on operations vis-à-vis Europe and Latin America. A large pool of skilled manpower and a growing technology base would induce greater investments.
The Government of India aims to develop the country 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 foreign direct investment (FDI) encouragement. National Automotive Testing and R&D Infrastructure Project (NATRiP) was set up at a total cost of US$ 388.5 million to enable the industry to be on par with global standards.
Tata Nano and the upcoming Pixel have opened up the potentially large ultra low-cost car segment. Innovation is expected to intensify among engine technology and alternative fuels.