India is expected to be the world’s third-largest automotive market in terms of volume by 2026.
The industry currently manufactures 25 mn vehicles, of which 3.5 mn are exported. India holds a strong position in the international heavy vehicles arena as it is the largest tractor manufacturer, second largest bus manufacturer and third largest heavy trucks manufacturer in the world.
- Rising income and a large young population
- Greater availability of credit and financing options
- Demand for commercial vehicles increasing due to high level of activity in infrastructure sector
- Clear vision of Indian government to make India an auto manufacturing hub.
- Initiatives like ‘Make in India’, ‘Automotive Mission Plan 2026’, and NEMMP 2020 to give a huge boost to the sector
Investments in Infrastructure:
- Improving road infrastructure
- Established auto ancillary industry giving the required support to boost growth
- 5 per cent of total FDI inflows to India went into the automobiles sector
India is fast emerging as a global R&D hub:
- Strong support from the government; setting up of NATRIP centres.
- Private players, such as Hyundai, Suzuki, GM, keen to set up R&D base in India.
- Strong education base, large skilled English-speaking manpower. Comparative advantage in terms of cost.
- Firms both national and foreign are increasing their footprints with over 1,165 R&D centres
Opportunities for creating sizeable market segments through innovations:
- Mahindra & Mahindra targeting on implementing digital technology in the business.
- Bajaj Auto, Hero Honda & M&M plan to jointly develop a technology for 2-wheelers to run on natural gas.
- Tata Motors to launch MiniCAT, a car running on compressed air,
- Hyundai is planning to enter the hybrid vehicles segment, to explore alternative fuel technology & to avail the government incentives
Small-car manufacturing hub:
- General Motors, Nissan & Toyota announced plans to make India their global hub for small cars.
- Passenger vehicle market is expected to touch 10 million units by 2020. Sales crossed 3.2 million in FY18.
- Strong export potential in ultra low-cost cars segment (to developing & emerging markets).
- Maruti Suzuki launched facelift version of Alto 800, after the success of earlier model
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 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 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. Two-wheelers are expected to grow 9 per cent in 2018