Automobile Industry in India

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  • 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.
  • Market Size

    Overall domestic automobiles sales increased at 7.01 per cent CAGR between FY13-18 with 24.97 million vehicles getting sold in FY18.

    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 [email protected] Sales of electric two-wheelers are estimated to have crossed 55,000 vehicles in 2017-18. Premium motorbike sales in India crossed one million units in FY18.

    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:

    • Ashok Leyland has planned a capital expenditure of Rs 1,000 crore (US$ 155.20 million) to launch 20-25 new models across various commercial vehicle categories in 2018-19.
    • 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. The government will also set up incubation centre for startups working in electric vehicles space.
    • 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.

    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.

    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

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