What are the opportunities in India for international automotive industry?

As we all know, India is the world leader in automotive sector. The leadership of the country is supported by domestic production capacity, market volume and export quantity. Automobile sector of India produces average 24 million vehicles annually and generates job opportunity for around 30 million people directly and indirectly. If you try to position it by industry segment, India is the topmost manufacturer of tractors in the world. The country stands fifth in heavy truck manufacturing, sixth in car manufacturing and eight in commercial vehicle manufacturing. The automotive sector of India offers attractive platform for investors and manufacturers from other countries. The proof of this is the fact that, German automobile giant Volkswagen is planning to invest almost 7900 Crores in India along with its Czech supporter Skoda. At the same time Kia Motors of South Korea, Toyota, car producers from China and some other car makers are also willing to take entry in Indian Market. (i, iv)

Automobile industry of the country and market size

Automotive industry is the biggest employment generator, contributor in GDP and generator of FDI. If you have a look at few facts from year 2015-16, the industry contributed around 7% in the country’s overall GDP and around 50 percent in the manufacturing GDP. The number of job opportunities with every single vehicle produced is very large. As per the studies of market research companies in India, the turnover rate of auto component industry has grown significantly in past few years playing a big role in GDP of the country and employment generator for millions of people. The export quantity has also grown by more than 20 percent. The main export destinations for automobile industry are Germany, United Kingdom, Italy and United Nations.

As India mostly has young and middle class population, the two-wheeler segment dominates most of the market share in automobile industry. The growth of the sector is also occurred due to the increasing interest of companies in exploring rural market. The passenger vehicles also hold significant market share just following the two wheeler sector. (iii, i)

Automobile sector shows positive opportunities

In past few years, great growth trends are noted in the automobile industry. Therefore, we can have positive expectations from the industry in near future. The production is increased by almost 3 percent in past 2 years producing millions of vehicles. The domestic sale of passenger vehicles is increased by around 7 percent. The sale of heavy vehicles is also increased by almost 30 percent. Only the light weight vehicle sale hasn’t shown any remarkable growth. The sale of three-wheeler vehicles is also grown by 1 percent. Two-wheeler sale is also grown by 3 percent. The rapid rise in production is a result of rapid rise in sales. The export of the vehicles has also increased by almost 2 percent. (i)

Foreign investment in automobile industry

The foreign direct investment in the automobile industry in India has increased by 72% in past few years. Leading automobile companies in the world like Volkswagen, Ford motors, Tata motors, Honda and Suzuki are looking for business opportunities in India. They are investing on large scale in manufacturing sector. This is also generating several job opportunities for local talent in the country. (Ref: ii)

Policies set by government for improving manufacturing in automobile industry

The automotive industry has given great importance by government in its manufacturing policy platform. The sector is named as sunrise sector by the government. Government’s automobile mission plan is developed for making India one of the three top manufacturing centres in the world by 2026. There is a scheme designed for meeting the demand for innovative and fuel saving vehicles. It is named as Faster Adoption and Manufacturing of Hybrid and Electronic Vehicles. This will help in promoting electronic vehicles by getting international market entry. The demonetization had caused decline in sales towards the end of 2016, but the ‘Make in India’ drive of the government has helped the sector to gain its pace back. (iii)

The policies of current government which are business oriented and focused towards infrastructure development, regulatory moderation and other developments which are beneficial to automobile sector. This is also generating opportunities for foreign companies and they are taking steps towards spreading their wings in the country.