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Automobile Industry in India

Last Updated : 16 Mar, 2023
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In India, the automobile industry is a vital force behind both macroeconomic expansion and technological advancement. Two-wheelers, trucks, cars, buses, and three-wheelers are all part of the Indian automobile sector, which is essential to the expansion of the Indian economy. Since the 1950s, when India’s yearly vehicle output was capped at 40.000 units, the country’s automotive industry has advanced significantly. The three top manufacturers—Hindustan Motors, Premier Automobiles, and Standard Motors—were limited to early production. Without noting the Pioneer Mr J.R.D. Tata’s involvement in establishing the Tata group with high standard Engineering Research Center (ERC) in 1965 to assist technological advancement, the development story of the Indian automobile industry cannot be considered complete. By developing indigenous technological expertise for trucks in partnership with Mercedes-Benz, Maruti debuted the 800 in 1983, changing the dynamics of the Indian passenger car market.  After liberalization, several global corporations began producing in India by 1990. Market development and rising car demand resulted in wholesome industry expansion. 

In FY22, 22.93 million automobiles were produced annually in India. Due to India’s large proportion of young people and expanding middle class, the two-wheeler category dominates the industry in terms of volume. Additionally, the expanding interest of businesses in investigating the rural markets contributed to the sector’s expansion. According to statistics from 2021, India has the fourth-largest automobile industry worldwide. India became the fourth-largest nation in the world by automobile industry worth in 2022. The auto sector in India is currently valued at more than $100 billion, produces 8% of the total exports, and accounts for 2.3% of the country’s GDP. ​

Highlights of the Automobile Industry in India:

  • By 2030, the EV market is anticipated to reach 10 million annual sales, growing at a CAGR of 49% between 2022 and 2030. By 2030, the EV sector will generate 50 million direct and indirect jobs.
  • It has been estimated that the market for financing EVs will be worth $50 billion in 2030, which is nearly 80% of the $60 billion retail car loan market in India today.
  • In FY23, the passenger vehicle market in India is anticipated to expand by 16%.
  • More than $222 billion is invested in India’s automotive industry, which accounts for 7.1% of the country’s GDP, and 8% of exports, and is expected to overtake the US as the third-largest automotive market by 2030.

Recent Investments in Automobile Industry in India:

  • Skoda Auto announced intentions to produce electric vehicles domestically in India in November 2021. Before committing to domestic manufacture, the company may bring its first EV, the Enyaq, via CBU.
  • To release six EVs by 2028, Hyundai announced plans to invest Rs. 4,000 crores (US$ 530.25 million) in R&D in India in December 2021.
    Indian Oil Corporation (IOC) and two other public sector oil companies declared in November 2021 that they would set up about 22,000 EV charging stations in India over the following three to five years.
  • To deliver their first electric two-wheeler within the next two years, TVS Motor Company and BMW Motorrad established a partnership in the two-wheeler EV area in December 2021.
  • To deliver their first electric two-wheeler within the next two years, TVS Motor Company and BMW Motorrad established a partnership in the two-wheeler EV area in December 2021.
  • To increase its capacity for producing electric vehicles, two-wheeler EV manufacturer HOP Electric Mobility, a diversified business venture of Rays Power Infra, plans to invest Rs. 100 crores (US$ 13.24 million) during the next two years.
  • A memorandum of understanding (MoU) was signed in February 2022 by the Karnataka Electric Supply Companies (ESCOMs) and Ather Energy, a manufacturer of electric two-wheeler will install 1,000 rapid charging stations around the state.
    Tata Power and Apollo Tyre’s Ltd. announced a strategic cooperation in February 2022 for the construction of 150 public charging stations around India.
  • To finance its future needs, including EV expansion, MG Motors, a subsidiary of China’s SAIC Motor Corp, announced plans to raise US$ 350–500 million in private equity in India in March 2022.
  • Tata Motors announced plans to invest Rs. 24,000 crores ($3.08 billion) over the following five years in its passenger vehicle division in April 2022.
     

Achievements of the Automobile Industry in India:

  • The UK and Indian Prime Ministers signed the UK-India Joint Roadmap 2030, which includes the development and hosting of E-Amrit, as well as a joint knowledge exchange initiative. E-Amrit is a one-stop shop for all information about electric vehicles, dispelling myths around their acceptance, purchases, investment opportunities, legislation, incentives, etc. ​
  • India ranks fourth globally in terms of the production of 2W and 3W vehicles and passenger cars.
  • BHEL has invested almost INR 30 crore in research and development and owns 34 patents and copyrights.
  • For the project’s 700 MWe Pressurized Heavy Water Reactor, the first of its kind in India, BHEL provided the Steam Turbine and Generator package.
  • With the support of SDMC, TCIL opens the first electric vehicle charging station in South Delhi at South Extn. Part I. This will promote the use of EVs and help to reduce pollution in Delhi’s metro area.
  • In a research titled “Banking on Electric Vehicles in India,” published by NITI Aayog, Rocky Mountain Institute (RMI), and RMI India, the necessity of priority-sector identification for retail lending is discussed.
  • At its office complex in Lapalang, Shillong, Power Grid Corporation of India Limited has set the cornerstone for the state of Meghalaya’s first-ever Electric Vehicle Charging Station (EVCS).
  • The Green Hydrogen Fuel Cell Electric Vehicle (FCEV) – Toyota Mirai is the most cutting-edge technology ever created. It is the first project of its type to be undertaken in India to develop an ecosystem based on green hydrogen.
    2877 public EV charging stations have been approved in 68 cities as part of the Ministry of Heavy Industries’ Scheme for Faster Adoption and Manufacturing of Electric Vehicles in India Phase-II (FAME India Phase II).
  • A Dual Fuel System for the Induction of CNG into a Diesel Engine was given a patent by the Patent Office to ARAI.
     

Challenges of the Automobile Industry in India:

  • Companies must adapt to shifting social preferences in a regulatory environment by meeting government and technological needs. 
  • The tax system, particularly the difference between excise and customs taxes on raw materials and finished automobiles the lack of resources, such as power, skilled labour, and technology, that are available at a fair price. ​
  • Transitioning to an electric drive-train is not so simple.

Leading Automobile Manufacturers in India:

Tata Motors

The largest vehicle manufacturer in India is Tata Motors. Tata Motors is a multinational automaker with its headquarters in Mumbai. It was founded back in 1945. Additionally, it is India’s third-largest maker of passenger vehicles. The Bombay Stock Exchange and the New York Stock Exchange list this Indian automaker. In 2020, Tata Motors brought in a total of 34.7 billion USD in revenue.

Hindustan Motors Limited

B.M. Birla established Hindustan Motors Limited in the year 1942. It belongs to the Birla Technical Services organisation as a functional subsidiary. Before Maruti Udyog, this company was recognized as India’s top automaker. In India, Hindustan Motors was a pioneer in the vehicle industry. In 2020, the company reported a sales turnover of Rs 39,136 crore.

Ashok Leyland

India’s top commercial vehicle producer is Ashok Leyland. It was started back in 1948. The company’s name has grown to be associated with manufacturing trucks, passenger buses, and emergency military vehicles over the years. It also happens to be India’s second-largest maker of commercial vehicles, with a market share of about 30%. The business has a record for selling about 60,000 cars and nearly 7000 engines annually. For the year 2020, Ashok Leyland was accountable for 174.67 billion rupees in total revenues.

Maruti Suzuki India Limited

It is the biggest producer of passenger cars in the nation. Maruti Suzuki India Limited, which is credited with starting the automobile revolution in the nation, was formerly known as Maruti Udyog Limited until 2007. This automotive corporation, which has its headquarters in Delhi, is the biggest manufacturer and auto market participant in India. In 2020, the business reported total revenues of Rs. 71,690.4 crores.

Bajaj Auto

Another significant automotive manufacturer in India is Bajaj Auto. It is regarded as one of India’s most reliable automakers. It is a functional Bajaj Group subsidy. The largest two- and three-wheeler manufacturer in India and one of the top producers worldwide is Bajaj Auto. This auto manufacturer was founded on November 2nd, 1945. In the country today, the name Bajaj Auto is linked with two and three wheelers.

Hyundai Motor India Limited

Hyundai Motors of South Korea owns all of Hyundai Motor India Limited (HMIL). Hyundai Motors is the sixth-largest automaker in the world and the biggest in South Korea. This Indian automaker is also the country’s biggest exporter of passenger automobiles. This company, which was founded on May 6th, 1996, has quickly become a dominant force in the Indian automotive industry.

Automotive Industry’s Contribution to India’s Economic Growth:

  • It aids in the expansion of the MSME sector. For instance, 35% of value addition to an automobile is contributed by MSMEs. The automotive aftermarket also offers hundreds of MSME’s involved in the auto value chain economic prospects.
  • The manufacturing industry gets a boost. The sector makes up about 35% of the manufacturing GDP and 6.4% of the overall GDP.
  • It is non-doubtful a source of employment. More than 8 million jobs are supported directly by it, and there could be up to 30 million more down the value chain.
  • It boosts investment in the economy. For instance, it has drawn $35 billion over the past ten years.
  • It is a major source of foreign money.  For instance, it contributes $27 billion in export earnings or around 8% of India’s overall merchandise exports.

Government schemes for Automotive Industry in India:

  • National Automobile Scrappage Policy: The Policy aims to establish a system for gradually replacing old, unsafe, and harmful automobiles with newer, safer, and more fuel-efficient ones. The strategy will increase sales of automobiles, create jobs, lower import costs, increase GST revenue, and assist in resolving the worldwide semiconductor chip shortage. The policy will be a crucial link in helping the nation develop a circular economy (from trash to wealth).
  • Fame India Scheme: By sponsoring 7000 e-Buses, 5 lakh e-3 Wheeler, 55000 e-4 Wheeler Passenger Cars, and 10 lakh e-2 Wheelers, the Scheme hopes to generate demand. About 2.8 lakh hybrid and electric vehicles received demand incentives totalling about INR 359 crore during the first phase of the FAME Scheme. Under Phase-I of the FAME India Scheme, the Ministry of Heavy Industries approved funding for 520 charging stations and related infrastructure totalling around INR 43 crore. For speedier adoption of electric mobility and growth of electric and hybrid technology to strengthen the eco-system in the country, the Fame India Scheme II is proposed to be implemented over three years with a financial outlay of INR 10,000 crore.
  • National Automotive Testing and Research Infrastructure Project (NATRIP): To enable the industry to accept and apply international performance standards, the project was established at a total cost of USD 573 million. It intends to combine the automotive engineering industries with India’s unrivalled strengths in IT and electronics.  The provision of affordable manufacturing and product development solutions is the key area of concentration.  To carry out NATRIP, the Ministry of Heavy Industries & Public Enterprises has established the NATRIP Implementation Society (NATIS), an independent body. Seven test centres have been chosen as part of the effort to set up the testing facilities: iCAT, GARC, NATRAX, ARAI, VRDE, NIAIMT, and NCVRS.
  • The Automotive Mission Plan 2016-26 (AMP 2026): It charts the course of the Indian automotive ecosystem’s development, outlining the precise rules and policies that will apply to research, design, technology, testing, manufacturing, import/export, sale, use, repair, and recycling of automotive vehicles, parts, and services. The automobile industry is anticipated to rank third globally and contribute 12% to GDP. By 2026, the sector has the potential to produce USD 300 billion in revenue and 65 million more jobs. One of the main drivers of the manufacturing sector and the “Make in India” initiative is the automobile industry. It intends to five-fold the number of vehicles exported.
  • National Electric Mobility Mission Plan: Through government-industry cooperation, the NEMMP project aims to promote hybrid and electric cars that are reliable, inexpensive, and competent and match consumer performance and price expectations. Additional goals of NEMMP 2020 include the development and promotion of domestic manufacturing capabilities, necessary infrastructure, customer awareness, and technology. Policies designed to gradually ensure that India has roughly 6-7 million electric and hybrid vehicles on the road by 2020, combined with some degree of technical indigenization, guaranteeing India’s position as a world leader in some vehicle segments.
  • India wants to switch to electric vehicles in 30% of private automobiles, 70% of commercial vehicles, and 80% of two- and three-wheelers by 2030.
  • In September 2021, the Indian government unveiled a PLI program for vehicles and auto parts totalling Rs. 25,938 crores ($3.49 billion).
    This program is anticipated to attract investments totalling more than Rs. 42,500 (US$ 5.74 billion) by 2026.
  • The Indian government altered the existing FAME-II (Faster Adoption and Manufacturing of Electric Vehicles-II) scheme in June of this year to encourage the use of electric two-wheelers in India.
  • The government did this by raising the subsidy rate for electric two-wheelers from Rs 10,000/kWh to Rs 15,000/kWh, which helped to narrow the price gap between gasoline-powered and electric vehicles.

Conclusion:

One of the most significant sectors in India’s economy that contributes significantly to global value chains is the automobile industry. Strong government support, which has enabled this sector to carve out a distinct path among India’s manufacturing sectors, has been a major factor in its rise. The country produces cars that are specifically tailored to meet the needs of low- and middle-income populations, setting it apart from other nations that also create cars. More domestic-led enterprises have dominated its growth story. The adoption of international best practices has, however, lagged behind China. More swiftly and comprehensively than in India, the Chinese auto industry’s business strategies accelerated technological learning. India, which can produce goods from start to finish, has developed into a large-car assembly and small-car manufacturing centre. Companies have begun exporting to other nations. Manufacturers in India participate in international innovation networks and source appropriate technologies from around the globe to support their R&D activities. India might climb up the value chain with significant investments in the development of new indigenous technologies that are eco-friendly and adhere to internationally recognized high-efficiency requirements.



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