India enjoys a strong position in the global heavy vehicles market as it is the largest tractor producer, second-largest bus manufacturer, and third-largest heavy truck manufacturer in the world. India’s automobile sector is split into four segments, i.e., two-wheelers, three-wheelers, passenger vehicles, and commercial vehicles, each having a few market leaders. Two-wheelers and passenger vehicles dominate the domestic demand.
In terms of market size, the Indian passenger car market was valued at US$ 32.70 billion in 2021, and it is expected to reach a value of US$ 54.84 billion by 2027 while registering a CAGR of over 9% between 2022-27. The global EV market was estimated at approximately US$ 250 billion in 2021 and by 2028 it is projected to grow by 5 times to US$ 1,318 billion.
India has a strong market in terms of domestic demand and exports. In January 2024, the total passenger vehicle sales reached 3,93,074*. Passenger Vehicles saw the highest ever sales in the month of January posting a growth of 14% compared to January 2023. This is because India has significant cost advantages, as automobile firms save 10-25% on operations vis-a-vis Europe and Latin America. The Indian automotive industry is targeting to increase the export of vehicles by five times during 2016-26. In FY23, total automobile exports from India stood at 47,61,487. This sector's share of the national GDP increased from 2.77% in 1992–1993 to around 7.1% presently. It employs about 19 million people directly and indirectly.
In January 2024, the total production of passenger vehicles*, 3W, 2W, and quadricycles was 2.32 million units. In April-January FY24, the total production of passenger vehicles, commercial vehicles, three-wheelers, two-wheelers, and quadricycles was 23.36 million units.
In the third quarter of 2023-24, total production of passenger vehicles*, commercial vehicles**, three wheelers, two wheelers, and quadricycles was 7.13 million units.
India has ample growth potential for the automobile industry considering that the car ownership in India lags significantly behind developed regions like the US, China, and Europe, where 80-90% of the population owns a car, compared to only around 8% in India. Foreign companies such as Kia Motors and Volkswagen have adapted themselves to cater to the large Indian middle-class population by dropping their traditional structure and designs. This has allowed them to compete directly with domestic firms, making the sector highly competitive.
India is currently shifting focus to electric cars to reduce emissions. India accomplished a significant milestone, with the sale of 13,25,112 EVs in FY24 (till January 2024). Overall, in 2022-23, 11,83,422 EVs were sold in India, indicating a 158% YoY growth in sales. A report by India Energy Storage Alliance estimated that the EV market in India is likely to increase at a CAGR of 36% until 2026. In addition, the projection for the EV battery market is forecast to expand at a CAGR of 30% during the same period.
There have been plenty of investments in the automobile sector recently, as the Government of India expects the automobile sector to attract US$ 8-10 billion in local and foreign investments by 2023. The automobile sector received a cumulative equity FDI inflow of about US$ 35.65 billion between April 2000 - December 2023. India is on track to become the largest EV market by 2030, with a total investment opportunity of more than US$ 200 billion over the next 8-10 years.
Under phase-II of FAME India Scheme, subsidy amounting to US$ 696.8 million (Rs. 5790 crores) has been awarded to EV manufacturers on sale of 13,41,459 number of electric vehicles till January 31, 2024.
In January 2024, BMW sold 1,340 luxury cars, the highest in the segment, which gave it a market share of 0.34%. Mercedes-Benz sold 1,333 cars in January 2024.
Ola Electric IPO to be the first auto company in India to launch an IPO in over two decades (20 years). It has an expected size of US$ 1.01 billion (Rs. 8,500 crore).
In January 2024, VinFast and Tamil Nadu Govt. signed a MoU to invest US$ 2 billion for an EV project in Thoothukudi, with US$ 500 million committed for the first phase, targeting 150,000 units annually.
In January 2024, Hyundai Motor India Limited announced US$ 743.8 million (Rs. 6,180 crore) investment plans in the state of Tamil Nadu including US$ 21.7 million (Rs. 180 crore) towards a dedicated ‘Hydrogen Valley Innovation Hub,’ in association with IIT- Madras.
In January 2024, Hyundai Motor India Ltd. finalized the acquisition and transfer of specified assets at General Motors India's Talegaon Plant in Maharashtra and inked an MoU with the Government of Maharashtra committing to an investment of US$ 722 million (Rs. 6,000 crore) in the state.
In January 2024, Mahindra & Mahindra Ltd. and the India-Japan Fund ("IJF"), managed by the National Investment and Infrastructure Fund Limited ("NIIF"), entered into a binding agreement, with IJF committing to invest US$ 48.1 million (Rs. 400 crore) in Mahindra Last Mile Mobility Limited (MLMML).
In January 2024, at the Vibrant Gujarat Global Summit, Maruti Suzuki announced the investment plans in Gujarat with a New Greenfield plant and a fourth line in SMG.
In December 2023, Tata Passenger Electric Mobility Ltd. (TPEM) and Bharat Petroleum Corporation Limited (BPCL) signed an MoU to jointly establish 7,000 public charging stations nationwide to enhance customer satisfaction.
In December 2023, Maruti Suzuki India Limited entered into an agreement with the Government of Haryana to establish the second Japan-India Institute for Manufacturing (JIM) as part of its corporate social responsibility (CSR) initiative. The company will invest US$ 698 thousand (Rs. 5.8 crore) to upgrade the existing ITI Kansala into a JIM.
In December 2023, Hero MotoCorp announced a partnership with Ather Energy for an interoperable fast-charging network in India which will cover 100 cities with over 1900 fast-charging points.
In November 2023, TVS Motor announced its entry into the European market through a distribution agreement with Emil Frey, a renowned automotive distribution company with a century-long legacy.
In November 2023, SAIC Motor and JSW Group announced a strategic joint venture to accelerate growth with focus on green mobility.
In November 2023, Tata Motors inaugurated its state-of-the-art Registered Vehicle Scrapping Facility in Chandigarh.
In October 2023, Hero MotoCorp inaugurated its first state-of-the-art premium dealership in India.
In October 2023, Tata Motors signed a definitive agreement to acquire a 27% stake in Freight Tiger, a software-as-a-service (SaaS) company, for US$ 17.99 million (Rs. 150 crore).
In July 2023, Renault Nissan to invest US$ 1,68,762.86 (Rs. 1.4 crore) to upgrade infrastructure at eight schools near Chennai.
In July 2023, Mahindra & Mahindra is in advanced talks with British International Investment (BII) and some other global investors to raise up to US$ 602.72 million (Rs. 5,000 crore) for its electric vehicles (EV) unit.
In June 2023, Tata Motors will invest US$ 2 billion towards developing new products and platforms over the next four years.
In June 2023, Hero MotoCorp to invest up to US$ 180.81 million (Rs. 1,500 crore) for developing premium bikes and EVs in India.
In June 2023, Kinetic Green Energy and Power Solutions are planning to raise up to US$ 100 million by selling a 10-15% stake in the company to investors.
In May 2023, Maruti Suzuki India plans to invest over US$ 5.5 billion to double capacity by 2030.
In April 2023, Power Finance Corporation Ltd (PFC) approves US$ 76.39 million (Rs. 633 crore) loan for 5,000 passenger EVs and 1000 cargo EVs.
In March 2023, the Central government sanctions US$ 72.41 million (Rs. 800 crore) under FAME India Scheme Phase II to Indian Oil (IOCL), Bharat Petroleum (BPCL), and Hindustan Petroleum (HPCL), for setting up 7,432 public fast charging stations across the country.
In the January-June period this year, Mercedes-Benz posted its best-ever half-yearly sales in India at 8,528 units, a growth of 13% a year-ago. During the same period BMW and Audi came at the 2nd and 3rd position with sales of 5,867 and 3,474 units, respectively.
In February 2023, Nissan and Renault plan to invest US$ 600 million in India over the next 3-5 years to expand their market share in passenger cars and electric vehicles.
In February 2023, German luxury car maker Audi India began local production of the Audi Q3 and Audi Q3 Sportback at the Skoda Auto Volkswagen India Private Limited (SAVWIPL) plant in Aurangabad.
In January 2023, MG Motor India planned to invest US$ 100 million to expand capacity, eyes 70% growth in 2023.
Tata Group Chairman, Mr. N Chandrasekaran said that "EV contribution in our portfolio is likely to increase to 25% in five years and reach 50% by 2030, thus significantly increasing investments in this sector“ in January 2023.
In January 2023, Global chief executive officer (CEO) Mr. Ola Kallenius said that India was Mercedes-Benz’s fastest-growing market worldwide in 2022 and plans on investing more.
Indian carmakers commit US$ 10 billion to add new capacity of 2.2 to 3 million units.
Investment flow into EV start-ups in 2022 (until September 15) has raised funds worth around US$ 673 million, according to Fintrackr. There is a need to set up proper charging infrastructure for EVs in India. To install electric vehicle supply equipment (EVSE) infrastructure for EVs, various public sector firms, ministries, and railways have come together to create infrastructure, and manufacture components.
In November 2022, Mahindra & Mahindra announced that they had tied up with three electric vehicle infrastructure partners - Jio-bp, Statiq, and Charge+Zone - to offer charging solutions for their range of passenger electric vehicles.
In December 2022, Mahindra & Mahindra planned to invest Rs. 10,000 crore (US$ 1.2 billion) for an EV manufacturing plant in Pune.
In September 2022, Kinetic Engineering Limited (KEL) invested in Ahmednagar to set up a dedicated production line with an initial capacity of 5,000 sets per month.
The Indian government has planned US$ 3.5 billion in incentives over a five-year period until 2026 under a revamped scheme to encourage the production and export of clean technology vehicles. Initiatives like Make in India, the Automotive Mission Plan 2026, and NEMMP 2020 will be net positive for the sector.
Mr. Nitin Gadkari, Minister of Road Transport and Highways has revealed plans to roll out Bharat NCAP, India’s own vehicle safety assessment program. In 2021, Prime Minister Mr. Narendra Modi launched the Vehicle Scrappage Policy, which aims to phase out old polluting vehicles in an environmentally safe manner.
The Government aims to develop India as a global manufacturing and research and development (R&D) hub. It has set up National Automotive Testing and R&D Infrastructure Project (NATRiP) centres as well as the National Automotive Board to act as facilitators between the Government and the industry. Under (NATRiP), five testing and research centres have been established in the country since 2015.
In August 2022, the Indian government launched India’s first double-decker electric bus in Mumbai. Looking long term, the government feels it is necessary to overhaul the country’s transportation system. It is working to create an integrated electric vehicle (EV) mobility ecosystem with a low carbon footprint and high passenger density with an emphasis on urban transportation reform. The government's strategy and policies are intended to promote greater adoption of electric vehicles in response to growing customer demand for cleaner transportation options.
Following the COVID-19 pandemic, the Indian automobile sector has bounced back and demonstrated a strong growth in FY23. A rebound in economic activity along with rising income levels and urbanization are currently driving the momentum in the Indian automobile industry. Moreover, the Indian government's focus on promoting sustainable and electric mobility is steering the industry towards a greener future. Incentives and subsidies for electric vehicles, coupled with stringent emission norms, are propelling research and development in eco-friendly technologies. This shift not only aligns with global environmental concerns but also positions Indian manufacturers as leaders in the evolving automotive landscape. Collaborations and partnerships between Indian automakers and international players are fostering technological advancements, enhancing product quality, and expanding market reach. This global integration contributes to the industry's competitiveness and positions it as a vital player in the international automotive arena.
Notes: *Data except for BMW, Mercedes, JLR, Tata Motors & Volvo Auto. ** Data except for Daimler, JBM Auto & Scania.
References: International Organization of Motor Vehicle Manufacturers, Media Reports, Press Releases, Department for Promotion of Industry and Internal Trade (DPIIT), Automotive Component Manufacturers Association of India (ACMA), Society of Indian Automobile Manufacturers (SIAM), Union Budget 2023-24
