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Indian Automobiles Industry Analysis

October, 2014

The automobile industry in India is expected to be the world's third largest by 2016, with the country currently the world's second largest two-wheeler manufacturer. Two-wheeler sales is projected to rise from 15.9 million in FY13 to 34 million by FY20. The segment registered a growth of 7.31 per cent in FY14. Furthermore, passenger vehicle sales is expected to increase to 8.6 million in FY21 from 3.2 million in FY13.

Strong growth in demand due to rising income, growing middle class, and a young population is likely to propel India among the world's top five auto manufacturers by 2015. Automobile export volumes increased at a compound annual growth rate (CAGR) of 19.1 per cent during FY05-13, out of which two-wheelers accounted for the largest share in exports at 67 per cent in FY13.

The government aims to develop India as a global manufacturing as well as a research and development (R&D) hub. It has set up National Automotive Testing and R&D Infrastructure Project (NATRiP) centres as well as a National Automotive Board to act as facilitator between the government and the industry. Some other government initiatives, including Auto Policy 2002, Automotive Mission Plan 2006-2016 and funds allocated in the Union Budget 2014-15 could go a long way in ensuring the growth of this sector.

Alternative fuel has the potential to provide for the country's energy demand in the auto sector as the CNG distribution network in India is expected to rise to 250 cities in 2018. Also, the luxury car market could register high growth and is expected to reach 150,000 units by 2020.

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