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Automobile Industry in India

INTRODUCTION

India's annual production of automobiles in FY21 was 22.65 million vehicles, and 13 million vehicles were produced between April-October 2021.

The two wheelers segment dominates the market in terms of volume owing to a growing middle class, and a huge percentage of India's population being young. 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. In addition, several initiatives by the Government of India and major automobile players in the Indian market is expected to make India one of the leaders in the two-wheeler and four-wheeler market in the world by 2022.

MARKET SIZE

For the calendar year (CY) 2021, all segments showed growth, and total sales increased by 5.8% to 18.49 million units, compared to 17.47 million units in January-December 2020.

In FY21, the total passenger vehicles production reached 22.65 million vehicles.

Two wheelers and passenger vehicles dominate the domestic Indian auto market. Passenger car sales are dominated by small and mid-sized cars. Two wheelers and passenger cars accounted for 81.21% and 14.56% market share, respectively, accounting for a combined sale of over 17.8 million vehicles in FY21.

In December 2021, the luxury car market registered sales of 2,259 units, a YoY growth of 19.7%, with Mercedes Benz being the highest-selling luxury car manufacturer.

In January 2022, total production of passenger vehicles*, three-wheelers, two-wheelers and quadricycles reached 1,860,809 units.

INVESTMENTS

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 attracted Foreign Direct Investment equity inflow (FDI) worth US$ 30.78 billion between April 2000-September 2021, accounting for 5.49% of the total equity FDI during the period.

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

  • In February 2022, a memorandum of understanding (MoU) was signed between electric two-wheeler company Ather Energy and Electric Supply Companies (ESCOMs) of Karnataka for setting up 1,000 fast charging stations across the state.
  • In February 2022, Tata Power and Apollo Tyres Ltd announced a strategic partnership for the establishment of 150 public charging stations across India.
  • In January 2021, leading commercial vehicle manufacturer Ashok Leyland teamed up with Aidrivers, a global leader in AI-enabled autonomous solutions for industrial mobility, to develop AI-enabled autonomous vehicles to fulfil the demands of a sustainable future.
  • Two-wheeler EV maker HOP Electric Mobility, a diversified business venture of Rays Power Infra, is looking at investing Rs. 100 crore (US$ 13.24 million) over the next two years to expand manufacturing capacity for its EVs.

GOVERNMENT INITIATIVES

The Government of India encourages foreign investment in the automobile sector and has allowed 100% FDI under the automatic route.

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

  • In February 2022, Mr. Nitin Gadkari, Minister of Road Transport and Highways, revealed plans to roll out Bharat NCAP, India's own vehicle safety assessment program.
  • In February 2022, 20 carmakers, including Tata Motors Ltd, Suzuki Motor Gujarat, Mahindra and Mahindra, Hyundai and Kia India Pvt. Ltd, were chosen to receive production-linked incentives (PLI) as part of the government's plan to increase local vehicle manufacturing and attract new investment. The 20 automobile companies have proposed a total investment of around Rs. 45,000 crore (US$ 5.95 billion).

ACHIEVEMENTS

Following are the achievements of the Indian automotive sector:

  • India enjoys a strong position in the global heavy vehicles market as it is the largest tractor producer, second-largest bus manufacturer, and third-largest heavy trucks manufacturer in the world.
  • In September 2021, Power Grid Corporation of India Limited (POWERGRID) laid the foundation stone of the first EV charging station in Meghalaya at its office complex at Lapalang, Shillong.
  • In July 2021, India inaugurated the NATRAX, which is Asia' s longest high-speed track and the fifth-largest in the world.
  • Investment flow into EV start-ups in 2021 touched an all-time high, increasing nearly 255% to reach Rs. 3,307 crore (US$ 444 million). acturing capacity for its EVs.

ROAD AHEAD

The automobile industry is dependent on 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.

The Indian auto industry is expected to record strong growth in 2022-23, post recovering from effects of COVID-19 pandemic. Electric vehicles, especially two-wheelers, are likely to witness positive sales in 2022-23.




source: www.ibef.org