Future of Automobile Industry in India

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What is Future of Automobile Industry in India?

This sector is very important economic sector from the perspective of revenue. In Indian Automobile market two wheelers segmentis the leader of the owing to a growing middle class and a young population with 80 per cent market share

What Expert says about the future of Automobile industry in India?

Indian auto industry is considered as one of the largest in the world. Indian auto industry accounts about 7.1 per cent of the country's Gross Domestic Product (GDP). Automotive industry includes wide range of companies and organizations involved in the design, development, manufacturing, marketing, and selling of motor vehicles. Automobile industry boosts the economic growth of the country. In India, Automobile industry includes two-wheeler, three wheeler and four wheeler. Economy progress of this industry is indicated by the amount of goods and services produced which give the capacity for transportation and boost the sale of vehicles. In this sector with the huge increase in automobile production it is indirectly increasing the demand for number of materials such as Steel, Rubber, Plastics, Glass, Paint, and Electronics.

This sector is very important economic sector from the perspective of revenue. In Indian Automobile market two wheelers segmentis the leader of the owing to a growing middle class and a young population with 80 per cent market share. Now companies interest is growing in exploring the rural market further added the growth of the sector. Overall Passenger Vehicle (PV) segment has 14 per cent market share. In the near future India has strong export growth expectations and a prominent auto exporter. Government of India has taken several initiatives. In Indian market major automobile players are expected to make India a leader by the year 2020in Two Wheeler and Four Wheeler market in the world.

In India, 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. This industry is also providing great opportunities for investment and direct and indirect employment to skilled and unskilled labour.

Market Size

In financial year 2017 production of passenger vehicles, commercial vehicles, three wheelers and two wheelers grew at 5.41 per cent to 25,316,044 vehicles from 24,016,599 vehicles in financial year 2016. During April-March 2017 sales of passenger vehicles grew by 9.23 per cent, commercial vehicles by 4.16 per cent and two wheelers by6.89 per cent. In India by the year 2020 Government of India’s vision to see six million electric and hybrid vehicles.

Regulatory Authority

In Automobile industry to set up a manufacturing company it would require monetary funds, and approval from the related authority in respect of acquiring land for manufacturing, to registering a company, to get safety ratings and approvals from stakeholders. Under this, one need to obtain industrial license from the central government, state government license (where you are supposed to start the plant), investors, raw material suppliers for manufacturing, deals with transport companies, dealership license, pollution control, safety related licenses, verification and any other license as required by Road Tax Authority of India.

Foreign Investment

During the last few months several auto makers have started investing heavily in various segments of the industry in order to keep up with the growing demand. According to data released by Department of Industrial Policy and Promotion (DIPP)during the period April 2000 to June 2017industry has attracted Foreign Direct Investment (FDI) of worth US$ 17.40 billion.

Government Initiatives

In the automobile sector, Government of India is encouraging foreign investment and allows 100 per cent FDI under the automatic route.

Here are the following major initiatives taken by the Government of India:

  • For road and water transportation,Government is planning to introduce biofuel vehicles. India needs to look after alternative and cheaper fuels like methanol and cut fossil fuel imports.
  • By increasing custom duty on CBUs of commercial vehicles from 10 per cent to 40 per cent Government of India extended support to the industry and reducing duty on chassis from 24 per cent to 12.5 per cent for ambulance manufacturing.
  • New Green Urban Transport Scheme plan introduced by the Government of India aimed at boosting the growth of urban transport along with low carbon path for substantial reduction in pollution with a central assistance and providing a framework for funding urban mobility projects at National, State and City level by encouraging innovative financing of projects.
  • As highlighted in the Auto Mission Plan (AMP) 2016-26Government 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.
  • In India, for Faster Adoption and Manufacturing of Electric and Hybrid Vehicles government has formulated a scheme under the National Electric Mobility Mission 2020to encourage the progressive induction of reliable, affordable and efficient electric and hybrid vehicles in the country.
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