Trade Analytics
Automobile
The automobile industry in India is expected to be the world's third largest by 2016.

Automobile Industry in India

Latest update: May, 2018

  • The automotive manufacturing industry comprises the production of commercial vehicles, passenger cars, three & two-wheelers.
  • Two-wheelers are by far the most popular form of vehicle in India, taking an 80 per cent share in 2015-16. India became the largest two-wheeler market in the world after selling 17.7 million two-wheelers in 2016.
  • 25.3 million automobiles produced in FY17.
  • Total production volume grew at a CAGR of 4.43 per cent during FY12-17.
  • Automobile exports from India increased 15.81 per cent year-on-year in April-February 2017-18. During the same period, two and three-wheelers exports increased 20.30 per cent and 37.02 per cent, respectively.

Note: FY18* - up to February 2018
Source: Society of Indian Automobile Manufacturers (SIAM)



Source: World Wealth Report (2011) of Merrill Lynch Wealth Management and Capgemini, Aranca Research, media sources

Last Updated: May, 2018

Introduction

The Indian auto industry is one of the largest in the world. The industry accounts for 7.1 per cent of the country's Gross Domestic Product (GDP). The Two Wheelers segment with 80 per cent market share is the leader of the Indian Automobile market 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. The overall Passenger Vehicle (PV) segment has 14 per cent market share.

India is also a prominent auto exporter and has strong export growth expectations for the near future. Overall automobile exports grew 15.81 per cent year-on-year between April-February 2017-18. 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 2W and Four Wheeler (4W) market in the world by 2020.

Market Size

Production of passenger vehicles, commercial vehicles, three wheelers and two wheelers grew at 14.41 per cent year-on-year between April-February 2017-18 to 26,402,671 vehicles.

The auto industry is set to witness major changes in the form of electric vehicles (EVs), shared mobility, Bharat Stage-VI emission and safety norms. Electric cars in India are expected to get new green number plates and may also get free parking for three years along with toll waivers@. India's electric vehicle (EV) sales increased to 25,000 units during FY 2016-17 and are poised to rise further on the back of cheaper energy storage costs and the Government of India’s vision to see six million electric and hybrid vehicles in India by 2020.

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$ 18.413 billion during the period April 2000 to December 2017, according to data released by Department of Industrial Policy and Promotion (DIPP).

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

  • The only electric automaker in India, Mahindra and Mahindra Ltd, has partnered with Uber for deploying its electric sedan e-Verito and hatchback e2o Plus on Uber platforms in New Delhi and Hyderabad.
  • Mahindra & Mahindra (M & M) is planning to make an additional investment of Rs 500 crore (US$ 77.23 million) for expanding the capacity for electric vehicles in its plant in Chakan.

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 -

  • The Government of Karnataka is going to obtain electric vehicles under FAME Scheme and set up charging infrastructure across Bengaluru, according to Mr R V Deshpande, Minister for Large and Medium Industries of Karnataka.
  • 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.
  • Energy Efficiency Services Limited (EESL), under Ministry for Power and New and Renewable Energy, Government of India, is planning to procure 10,000 e-vehicles via demand aggregation, and has already awarded contracts to Tata Motors Ltd for 250 e-cars and to Mahindra and Mahindra for 150 e-cars.
  • The government is planning to set up a committee to develop an institutional framework on large-scale adoption of electric vehicles in India as a viable clean energy mode, especially for shared mass transport, to help bring down pollution level in major cities.

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.

The Indian automotive aftermarket is estimated to grow at around 10-15 per cent to reach US$ 16.5 billion by 2021 from around US$ 7 billion in 2016. It has the potential to generate up to US$ 300 billion in annual revenue by 2026, create 65 million additional jobs and contribute over 12 per cent to India’s Gross Domestic Product#.

Exchange Rate Used: INR 1 = US$ 0.015 as of March 1, 2018

References: Media Reports, Press Releases, Department of Industrial Policy and Promotion (DIPP), Automotive Component Manufacturers Association of India (ACMA), Society of Indian Automobile Manufacturers (SIAM), Union Budget 2015-16, Union Budget 2017-18

# - As per the Automotive Mission Plan 2016-26 prepared jointly by the Society of Indian Automobile Manufacturers (SIAM) and government, @ - as per the draft policy on e-vehicles prepared by NITI Aayog, Government of India

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

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