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Electric vehicles sales, excluding e-rickshaws, in India witnessed a growth by 20 per cent to reach 1.56 lakh units in 2019-20 driven by two-wheelers.

Automobile Industry in India

    Last updated on Oct, 21 2020

Indian Automobile Industry Report  (Size: 694.66 KB ) (September, 2020)

Introduction

India became the fourth largest auto market in 2019 displacing Germany with about 3.99 million units sold in the passenger and commercial vehicles categories. India is expected to displace Japan as the third largest auto market by 2021

The two wheelers segment dominate the market in terms of volume owing to a growing middle class and a young population. Moreover, the growing interest of the companies in exploring the rural markets further aided the growth of the sector.

India is also a prominent auto exporter and has strong export growth expectations for the near future. In addition, several initiatives by the Government of India and major automobile players in the Indian market is expected to make India a leader in the two-wheeler and four-wheeler market in the world by 2020.

Market Size

Domestic automobiles production increased at 2.36% CAGR between FY16–20 with 26.36 million vehicles being manufactured in the country in FY20. Overall, domestic automobiles sales increased at 1.29% CAGR between FY16–FY20 with 21.55 million vehicles being sold in FY20.

Two wheelers and passenger vehicles dominate the domestic Indian auto market. Passenger car sales are dominated by small and mid-sized cars. Two wheelers and passenger cars accounted for 80.8% and 12.9% market share, respectively, accounting for a combined sale of over 20.1 million vehicles in FY20.

Overall, automobile export reached 4.77 million vehicles in FY20, growing at a CAGR of 6.94% during FY16-FY20. Two wheelers made up 73.9% of the vehicles exported, followed by passenger vehicles at 14.2%, three wheelers at 10.5% and commercial vehicles at 1.3%.

EV sales, excluding E-rickshaws, in India witnessed a growth of 20% and reached 1.56 lakh units in FY20 driven by two wheelers.

Premium motorbike sales in India recorded seven-fold jump in domestic sales, reaching 13,982 units during April-September 2019. The sale of luxury cars stood between 15,000 to 17,000 in the first six months of 2019.

Investments

In order to keep up with the growing demand, several auto makers have started investing heavily in various segments of the industry during the last few months. The industry has attracted Foreign Direct Investment (FDI) worth US$ 24.21 billion between April 2000 and March 2020, according to the data released by Department for Promotion of Industry and Internal Trade (DPIIT).

Some of the recent/planned investments and developments in the automobile sector in India are as follows:

  • In September 2020, Toyota Kirloskar Motors announced investments of more than Rs 2,000 crore (US$ 272.81 million) in India directed towards electric components and technology for domestic customers and exports
  • During early September 2020, Mahindra & Mahindra singed a MoU with Israel-based REE Automotive to collaborate and develop commercial electric vehicles
  • During the same month, Volkswagen announced merger of its three entities in India, the new entity will be called Skoda Auto Volkswagen India Private Limited.
  • In April 2020, TVS Motor Company bought UK’s iconic sporting motorcycle brand, Norton, for a sum of about Rs 153 crore (US$ 21.89 million), making its entry into the top end (above 850cc) segment of the superbike market.
  • As of May 2019, Jaguar Land Rover (JLR) launched its locally assembled Range Rover Velar, making JLR cars more affordable by quite some margin.
  • In March 2020, Lithium Urban Technologies partnered with renewable energy solutions provider, Fourth Partner Energy, to build charging infrastructure across the country.
  • In January 2020, Tata AutoComp Systems, the auto-components arm of Tata Group entered a joint venture with Beijing-based Prestolite Electric to enter the electric vehicle (EV) components market.
  • In December 2019, Force Motors planned to invest Rs 600 crore (US$ 85.85 million) to develop two new models over the next two years.
  • In December 2019, Morris Garages (MG), a British automobile brand, announced plans to invest an additional Rs 3,000 crore (US$ 429.25 million) in India.
  • Audi India planned to launch nine all-new models including Sedans and SUVs along with futuristic E-tron EV by end of 2019.
  • MG Motor India planned to launch MG ZS EV electric SUV in early 2020 and have plans to launch affordable EV in the next 3–4 years.
  • BYD-Olectra, Tata Motors and Ashok Leyland will supply 5,500 electric buses for different state departments.

Government Initiatives

The Government of India encourages foreign investment in the automobile sector and has allowed 100% foreign direct investment (FDI) under the automatic route.

Some of the recent initiatives taken by the Government of India are –

  • Under Union Budget 2019–20, the Government announced to provide additional income tax deduction of Rs 1.5 lakh (US$ 2,146) on the interest paid on the loans taken to purchase EVs.
  • The Government aims to develop India as a global manufacturing centre and a Research and Development (R&D) hub.
  • Under NATRiP, the Government of India is planning to set up R&D centres at a total cost of US$ 388.5 million to enable the industry to be on par with global standards
  • The Ministry of Heavy Industries, Government of India has shortlisted 11 cities in the country for introduction of EVs in their public transport systems under the FAME (Faster Adoption and Manufacturing of (Hybrid) and Electric Vehicles in India) scheme. The Government will also set up incubation centre for start-ups working in the EVs space.
  • In February 2019, the Government of India approved FAME-II scheme with a fund requirement of Rs 10,000 crore (US$ 1.39 billion) for FY20–22.

Achievements

Following are the achievements of the Government in the last four years:

  • In H12019, automobile manufacturers invested US$ 501 million in India’s auto-tech start-ups according to Venture intelligence.
  • Investment flow into EV start-ups in 2019 (till end of November) increased nearly 170% to reach US$ 397 million.
  • On 29th July 2019, Inter-ministerial panel sanctioned 5,645 electric buses for 65 cities.
  • NATRiP’s proposal for “Grant-In-Aid for test facility infrastructure for EV performance Certification from NATRIP Implementation Society” under the FAME Scheme was approved by Project Implementation and Sanctioning Committee (PISC) on 3rd January 2019.
  • Under NATRiP, following testing and research centres have been established in the country since 2015
    • International Centre for Automotive Technology (ICAT), Manesar
    • National Institute for Automotive Inspection, Maintenance & Training (NIAIMT), Silchar
    • National Automotive Testing Tracks (NATRAX), Indore
    • Automotive Research Association of India (ARAI), Pune
    • Global Automotive Research Centre (GARC), Chennai
  • SAMARTH Udyog – Industry 4.0 centres: ‘Demo cum experience’ centres are being set up in the country for promoting smart and advanced manufacturing helping SMEs to implement Industry 4.0 (automation and data exchange in manufacturing technology).

Road Ahead

The automobile industry is supported by various factors such as availability of skilled labour at low cost, robust R&D centres, and low-cost steel production. The industry also provides great opportunities for investment and direct and indirect employment to skilled and unskilled labour.

Indian automotive industry (including component manufacturing) is expected to reach Rs 16.16-18.18 trillion (US$ 251.4–282.8 billion) by 2026.

 

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 2015–16, Union Budget 2019–20

Note: Conversion rate used in April 2020, Rs 1 = US$ 0.013123

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

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