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

Automobile Industry in India

Latest update: February, 2018



  • The automotive manufacturing industry comprises the production of commercial vehicles, passenger cars, and three & two-wheelers.
  • Two-wheelers are by far the most popular form of vehicle in India, taking an 80% share in 2015-16.
  • 25 million automobiles produced in FY17.
  • Total production volume grew at a CAGR of 5.56 per cent between FY12-17.



Source: Society of Indian Automobile Manufacturers (SIAM)



  • Two-wheelers and passenger vehicles dominate Indian auto market .
  • Two-wheelers and passenger cars accounted for 78 per cent and 15 per cent of production volume in FY17 respectively.
  • Domestic passenger car sales dominated by small and mid-size cars.
  • Over 67 per cent of export volumes comprised of two-wheelers, followed by 22 per cent for passenger cars.



Source: Society of Indian Automobile Manufacturers (SIAM)


Last Updated: March, 2018

SECTORAL REPORT | February, 2018


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 13.01 per cent year-on-year between April-December 2017. 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 11.27 per cent year-on-year between April-December 2017 to 21,415,719 vehicles. The sales of passenger vehicles and two wheelers grew by 5.22 per cent and 40.31 per cent year-on-year respectively, in December 2017.

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 37.5 per cent to 22,000 units during FY 2015-16 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.


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$ 17.91 billion during the period April 2000 to September 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.
  • Vedanta Resources Plc is planning to invest around US$ 9 billion in India and create more than a million direct or indirect jobs in the country.

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 January 4, 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.


Brand India Pharma


india is expected to become the third largest market for electric vehicles by 2025 at 2.5 million vehicles.

+ More >

Brand India Pharma

IBEF Publications

IBEF Publication

India Now Magazine

Rural India


+ More Publications >

IBEF Publication


author_Siddartha-Sacheti-Jaipur-Gems-CEO.jpg "Indian jewellers, especially those with heritage, have massive potential as brands themselves"
Mr Siddhartha Sacheti, CEO - Jaipur Gems

Jaipur Gems is one of India's largest producers and exporters of gems and jewellery. It has an international presence via retail stores, and has won multiple internat...

author_logo-ibef1.jpg Mid-term review of foreign trade policy: An update
IBEF, Knowledge Centre

The Indian Government announced the mid-term review of Foreign Trade Policy 2015-20 on December 5, 2017. Overall, the policy is expected to make Indian exports more compe...

author_Satish-Kannan1.jpg Internet Proliferation is Making Access to Healthcare Easier
Satish Kannan, Co-founder and CEO, DocsApp

In today's age, it's sometimes easy to forget that the internet is not just for networking and entertainment. It has a purpose and a vast reach; when used correct...

author_logo-ibef1.jpg Auto Expo 2018
IBEF, Knowledge Centre

Held at two separate venues in 2018, the Auto Expo is India’s largest auto gathering. The Auto Expo 2018–Vehicles is scheduled to be held at India Expo Mart, ...

author_Amit_Wadhwani1.jpg 2018 to witness a green revolution in realty and infrastructure
Mr Amit Wadhwani, Director, Sai Estate Consultants

As the Indian real estate and infrastructure sectors look towards a greener future, the investment opportunities are promising and plentiful.In recent years, India has em...

author_logo-ibef1.jpg The Journey From Fragile Five to Favored Investment Destination
IBEF, Knowledge Centre

From being labeled the ‘Fragile Five’(a term coined Morgan Stanley to represent emerging market economies)in 2013 to become one of the most favored investment...

ideas More


Clean N' Green
Who thought banning plastic bags by the municipal corporation of Mangalore could spark the thought of creating eco-friendly products. Well, Mr Aswath Hegde, founder, EnviGreen Biotech Private Limited did. With a passion to preserve the environment and perseverance to achieve it, he and his friends created a 100 per cent..


Join now. Enjoy FREE subscriptions downloads, updates and more.


Already a member?
Login / Retrieve Password