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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

Latest update: March, 2020

Growth

 

Last Updated: March, 2020

Indian Automobile Industry Report  (Size: 690.38 KB ) (May, 2020)

Introduction

India became the fourth largest auto market in 2018 with sales increasing 8.3 per cent year-on-year to 3.99 million units. It was the seventh largest manufacturer of commercial vehicles in 2018.

The Two Wheelers segment dominates 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. Automobile exports grew 14.50 per cent during FY19. It is expected to grow at a CAGR of 3.05 per cent during 2016-2026. In addition, several initiatives by the Government of India and the major automobile players in the Indian market are expected to make India a leader in the two-wheeler and four-wheeler market in the world by 2020.

Market Size

Overall domestic automobiles sales increased at 6.71 per cent CAGR between FY13-19 with 26.27 million vehicles getting sold in FY19. Domestic automobile production increased at 6.96 per cent CAGR between FY13-19 with 30.92 million vehicles manufactured in the country in FY19.

In FY19, year-on-year growth in domestic sales among all the categories was recorded in commercial vehicles at 17.55 per cent followed by 10.27 per cent year-on-year growth in the sales of three-wheelers.

Automobile exports grew 14.50 per cent year-on-year during FY19, while during April-December 2019, overall export increased by 3.9 per cent.

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 first six months of 2019.

Sales of electric two-wheelers are estimated to have crossed 55,000 vehicles in 2017-18.

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$ 23.89 billion during the period April 2000 to December 2019, according to 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 January 2020, Tata AutoComp Systems, the auto-component arm of the 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) in order to develop two new models over the next two years.
  • In December 2019, Morris Garages (MG), a British automobile brand announced plans to invest Rs 3,000 crore (US$ 429.25 million) more into India.
  • Audi India plans to launch nine all-new models including Sedans and SUVs along with futuristic e-tron electric vehicle (EV) by the end to 2019.
  • MG Motor India to launch MG ZS EV electric SUV in early 2020 and plans to launch affordable EV in next 3-4 years.
  • BYD-Olectra, Tata Motors, Ashok Leyland to supply 5,500 electric buses for different state departments.
  • 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 first six months of 2019.
  • In H1 2019, automobile manufacturers invested US$ 501 million in India’s auto-tech companies start-ups, according to Venture intelligence
  • For self-driving and robotic technology start-ups, Toyota plans to invest US$100 million.
  • In India, 7 Series face lift launched by BMW and the new X7 SUV has been introduced at Rs 98.90 lakh (US$ 0.14 million).
  • Ashok Leyland has planned a capital expenditure of Rs 1,000 crore (US$ 155.20 million) to launch 20-25 new models across various commercial vehicle categories in 2018-19.
  • Hyundai is planning to invest US$ 1 billion in India by 2020. SAIC Motor has also announced to invest US$ 310 million in India.
  • Mercedes Benz has increased the manufacturing capacity of its Chakan Plant to 20,000 units per year, highest for any luxury car manufacturing in India.
  • As of October 2018, Honda Motors Company is planning to set up its third factory in India for launching hybrid and electric vehicles with the cost of Rs 9,200 crore (US$ 1.31 billion), its largest investment in India so far.
  • In November 2018, Mahindra Electric Mobility opened its electric technology manufacturing hub in Bangalore with an investment of Rs 100 crore (US$ 14.25 million) which will increase its annual manufacturing capacity to 25,000 units.

Government Initiatives

The Government of India encourages foreign investment in the automobile sector and allows 100 per cent FDI under the automatic route.

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

  • Under Union Budget 2019-20, 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 an 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 electric vehicles (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 electric vehicles space.
  • In February 2019, the Government of India approved the 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 past four years:

  • In H1 2019, automobile manufacturers invested US$ 501 million in India’s auto-tech companies start-ups, according to Venture intelligence.
  • Investment flows into electric vehicles start-ups in 2019 (until the end of November) increased nearly 170 per cent to reach US$ 397 million.
  • On 29th July 2019, Inter-ministerial has sanctioned 5,645 electric buses for 65 cities.
  • NATRIP’s proposal for “Grant-In-Aid for test facility infrastructure for Electric Vehicle (EV) performance Certification from NATRIP Implementation Society” under FAME Scheme which had been approved by Project Implementation and Sanctioning Committee (PISC) on 3rd January 2019.
  • Number of vehicles supported under FAME scheme increased from 5,197 in June 2015 to 192,451 in March 2018. During 2017-18, 47,912 two-wheelers, 2,202 three-wheelers, 185 four-wheelers and 10 light commercial vehicles were supported under FAME scheme.
  • Under National Automotive Testing And R&D Infrastructure Project (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: 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 as on January 2020, Re 1 = US$ 0.01402

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

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