India has risen to become world’s 5th largest vehicle market, holding a strong position specially in the international heavy vehicles arena. The industry accounts for 7.1% of the country’s GDP & has generated employment for 35 million people. India’s annual production was 22.7 million vehicles in 2021 out of which 13 million vehicles were manufactured during April –October 2021. The Two Wheelers segment with 81% market share is the leader of the Indian Automobile market owing to a growing middle class & a young population. The industry’s share in India’s total exports is 4.7%. During FY 2018-19, FDI in automobile registered a growth of 25.5%.
100% FDI
allowed under
automatic route
Current Scenario
- In order to keep up with the growing demand, several auto makers have been investing heavily in various segments of the industry in India
- The sector attracted $ 31.80 billion FDI during April 2000 -December 2021; accounting for 5.5% of the total FDI inflows
- The industry currently manufactures 22.7 million vehicles, of which 4.1 million vehicles are exported
- India is the largest tractor manufacturer, 2nd largest bus manufacturer, 3rd largest heavy trucks manufacturer & 4th largest car manufacturer globally
Investment Opportunities
- Low-cost Electric Vehicles (EVs) – The Government envisions to have 100% electrical mobility by 2030
- India accounts for 40% of global engineering & R&D spend
- Replacement market share in sub-segments such as clutches is likely to grow due to rising traffic density. The entry of global players is expected to intensify competition in sub-segments such as gears & clutches
- Manufacturers are expected to benefit from the growing demand for sheet metal parts, body & chassis, fan belts, pressure die castings, hydraulic pneumatic instruments in the two-wheeler segment
Why Invest?
- Present day norms of social distancing & minimal physical contact likely to encourage people to avoid risk of public transport & switch to privately owned vehicles
- PLI scheme in the Automobile &Auto Components sectors with financial outlay of INR 259.38 billion.
- An emerging global hub for sourcing auto components despite temporary slowdown
- Geographically closer to key automotive markets like the ASEAN, Japan, Korea & Europe.
- Favorable trade policy with few restrictions on export-import
- Establishment of automotive training institutes & auto design centers, special auto parks &virtual SEZs for auto components
Read Ahead
- 5th largest / highest FDI attracting sector in India. EV Industry expected to create 50 million jobs by 2030
- $ 118 billion Automobile industry is expected to reach $ 300 billion by 2026
- By 2026, India is expected to be the 3rd largest automotive market by volume globally
- Global car majors have been ramping up investments in India to cater to growing domestic demand. These manufacturers plan to leverage India’s competitive advantage to set up export-oriented production hubs.
