Automobile Industry in India
Latest update: October, 2017
- 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)
![Growth of ATMs in India](https://www.ibef.org/uploads/industry/automobiles-sep-2017-01.jpg?1509618594205)
Last Updated: October, 2017
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. In April-March 2017 exports of PV and Commercial Vehicles (CV) registered a growth of 16.20 per cent and 4.99 per cent respectively, over April-March 2016. 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 5.41 per cent in FY17 to 25,316,044 vehicles from 24,016,599 vehicles in FY16.The sales of passenger vehicles, commercial vehicles and two wheelers grew by 9.23 per cent, 4.16 per cent and 6.89 per cent respectively, during the period April-March 2017.
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.
Investment
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$ 17.40 billion during the period April 2000 to June 2017, according to data released by Department of Industrial Policy and Promotion (DIPP).
Some of the major investments and developments in the automobile sector in India are as follows:
- JSW Energy, a subsidiary of Jindal Group, has signed a Memorandum of Understanding (MoU) with the Gujarat government to set up an electric vehicle-manufacturing company at a cost of Rs 4,000 crore (US$ 613 million) which will have the capacity to produce 2,00,000 electric vehicles every year.
- Tata Motors will invest Rs 4,000 crore (US$ 612 million) in the year 2017 and a major portion will go to passenger vehicles i.e. Rs 2,500 crores (US$ 375 million) and the remaining Rs 1,500 crore ($225 million) will be invested in the business over the next few years.
- Electric car maker Tesla Inc. is likely to introduce its products in India sometime in the summer of 2017.
- Kia Motors is expected to sign a memorandum of understanding (MoU) with the Government of Andhra Pradesh (AP) to set up a factory in Penukonda in Anantapur district and the company will invest around US$ 2 billion on this plant and it will have manufacturing capacity of the 3 lakhs car per annum.
- Several automobile manufacturers, from global majors such as Audi to Indian companies such as Maruti Suzuki and Mahindra & Mahindra, are exploring the possibilities of introducing driverless self-driven cars for India.
- BMW plans to manufacture a local version of below-500 CC motorcycle, the G310R, in TVS Motor’s Hosur plant in Tamil Nadu, for Indian markets.
- Hero MotoCorp Ltd seeks to enhance its participation in the Indian electric vehicle (EV) space by pursuing its internal EV Programme in addition to investing Rs 205 crore (US$ 30.75 million) to acquire around 26-30 per cent stake in Bengaluru-based technology start-up Ather Energy Pvt Ltd.
- Ford Motor Co. plans to invest Rs 1,300 crore (US$ 195 million) to build a global technology and business centre in Chennai, which will be designed as a hub for product development, mobility solutions and business services for India and other markets.
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 major initiatives taken by the Government of India are
- Government is planning to introduce biofuel vehicles for road and water transportation. India needs to cut fossil fuel imports and look for alternative and cheaper fuels like methanol.
- Government of India extended support to the industry by increasing custom duty on CBUs of commercial vehicles from 10 per cent to 40 per cent and reducing duty on chassis for ambulance manufacturing from 24 per cent to 12.5 per cent.
- The Government of India plans to introduce a new Green Urban Transport Scheme with a central assistance of about Rs 25,000 crore (US$ 3.75 billion), aimed at boosting the growth of urban transport along low carbon path for substantial reduction in pollution, and providing a framework for funding urban mobility projects at National, State and City level with minimum recourse to budgetary support by encouraging innovative financing of projects.
- Government of India aims to make automobiles manufacturing the main driver of ‘Make in India’ initiative, as it expects passenger vehicles market to triple to 9.4 million units by 2026, as highlighted in the Auto Mission Plan (AMP) 2016-26.
- The government has formulated a Scheme for Faster Adoption and Manufacturing of Electric and Hybrid Vehicles in India, under the National Electric Mobility Mission 2020 to encourage the progressive induction of reliable, affordable and efficient electric and hybrid vehicles in the country.
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#.
According to Mr Guillaume Sicard, president, Nissan India Operations, the income tax rate cut from 10 per cent to 5 per cent for individual tax payers earning under Rs 5 lakh (US$ 7,472) per annum will create a positive sentiment among likely first time buyers for entry level and small cars.
Exchange Rate Used: INR 1 = US$ 0.015 as of October 6, 2017
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
- Get link
- Other Apps
- Get link
- Other Apps
Comments
Post a Comment