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Shubham & Saurao

Automobile Industry

Introduction:-

The Indian Automobile Industry is one of the largest Industry in India and play a pivotal role in the industrial growth and country’s economic growth. It is considered to be the pillar of Indian economy. The Automobile Industry contributes 7.1 % share in India’s GDP and Generating about 19 million direct and indirect employment in India. The Indian Automobile Industry contributes 40 % Share in Global R&D and also contribute 4.7 % share in India’s exports. The industry encompasses a diverse range of vehicles including passenger vehicles, two-wheelers and three-wheelers. India is also largest manufacturer of truck, Two-wheeler and three-wheeler vehicle in world.


Market Size & Growth Prospects:-



The Indian Automobile Industry is estimated to be around 21.2 million unit per annum (FY 23). The Industry has grown at 4.4% (10 year CAGR). The two wheeler and Passenger Vehicles dominate the Indian Automobile Industry. The two-wheelers accounted for 76.88 % and Passenger Vehicles accounted for 17.52 % of total 17.52 million unit sold in FY 22. The Passenger Vehicle is main dominated by small and mid-sized cars. Export of the total number automobiles increased from 4.1 million in FY 21 to 5.6 million units in FY 22 with growth rate of 35.9 %. India is aiming to double its Automobile Industry Size to Rs. 15 lakh crores by end of year 2024. The growth of Indian Automobile Industry is expected to grow at 8-10% CAGR in upcoming few years. The factors driving the growth:-


1. Rising Income Levels:-


With a growing middle-class population and increasing disposable incomes, consumers are more inclined to invest in personal vehicles, especially passenger cars.


2. Economy Recovery:-

After the Covid-19 Impact, Indian Economy is on the track to recover there is likely of increase in consumer spending, which in turn could drive the demand of automobile industry.


3. Government Initiatives & Budget Allocation:-

The Indian Government is focusing on promoting more electric vehicle and increasing awareness of usage of electric vehicles and recent increase in budget allocation of the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) II by 78% in the Union Budget 2023.


4. Infrastructure Development :-

The Indian road network is increasing at whooping pace and is on track of world class standard. As per the current projections the highway construction industry is projected to grow at 133% which in turn is expected to increase the vehicle demand in India. With new project such as Mumbai-Nagpur Highway, Mumbai-Delhi Highway, Amritsar-jamnagar Highway etc. the need of passenger vehicle is expected to grow.


5. Export and Global Expansion:-

Export of the total number automobiles increased from 4.1 million in FY 21 to 5.6 million units in FY 22 with growth rate of 35.9 %. It is expected to grow even further in few years. India is one of the largest exporter of two-wheelers.


6. Increase in FDI Inflow:-

The FDI Inflow in Automobile industry has been around $33.77 billion from April 2020 to September 2022 which is around 5.48 % of total FDI inflow in India. With growing FDI inflow it is expected to grow R&D.


Type of Automobile & Corresponding Market Share:-

There are 4 different type of automobiles:-

1. Two- Wheelers

2. Three-Wheelers

3. Passenger Vehicles

4. Commercial Vehicles


In FY23 Two-Wheelers had the highest market share in the automobile industry across India with 75% market share & 15.86 million unit sold in FY23. The second highest market share is hold by Passenger Vehicles with 18.35% market share & 3.89 million unit sold in FY23. The Commercial Vehicles hold around 4.54 % market share with 0.96 million unit sold in FY23 and the Three-Wheelers Market share stood at 2.30% market share with 0.49 million unit sold in FY23.





Supply Chain Analysis:-

The Automobile Industry Supply chain can be divided into 5 parts:-




India imports around $17.5 Billion of auto components annually. Most are from china, USA, Europe. Any issue in Geopolitical tensions can led to increase in price of auto Component and raw material. The rising raw material prices, semiconductor Chip shortage have the big impact on supply chain. The price of material critical to automobile industry such as steel, aluminum, rubber have significantly risen since 2020. The lack of local sources for many critical component creates a challenge for supply chain. Also, the cost of logistic have a big impact on supply chain. Logistic cost as a percent of sales is 1% higher than any other Asian markets. The key challenge for supplier will be managing cost. There is currently as increase in 10-15% of increase in cost of logistic Y-O-Y driven by multiple factor. As India is a price sensitive market the automobile companies will find it hard to pass all the cost on customer. As well the export of India’s Automobile is expected to grow at higher pace and suppliers needs to scope up with demand which creates new challenge in supply chain.


Government Initiatives:-

The Indian Government in recent years have started lot of initiative to drive the growth in automobile sector as well manufacturing growth in the sector.



1. PLI Scheme by the Government:-

The Production Linked Incentive (PLI) Scheme in the Automobile Sector is expected to bring investment for $ 5.74 Billion (42,500 Cr) by 2026. The union Cabinet of Indian government has outlaid $3.5 Billion for the automobile sector to boost the manufacturing of advanced automotive technology and attract the investment in automobile sector. This Scheme has been successful in attracting the Investment of INR 67,690 Cr over a period of five years. Total of 115 OEM companies filed their application in this scheme. Apart from Indian companies OEM incentive scheme include applicant from Netherland, UK, japan, France, USA.


2. FAME Scheme:-

The FAME (Faster Adoption and Manufacturing of Electric and Hybrid Vehicles) is a scheme by Indian Government focusing of manufacturing and adoption of Hybrid and electric vehicles in Indian. The Phase 1 of this scheme was extended till 31st march 2019. In the first phase about 2.8 lakh were supported by way of demand of hybrid and electric vehicle amounting to INR 359 CR. Also, 520 charging station were sanctioned by Government amounting in INR 43 Cr in phase 1.


For Phase 2 the Indian Government has outlaid INR 10,000 Cr over a period of 3 year. Thi phase aims to generate 7000 e-buses, 5000 e-3 wheelers, 5500 e-4 wheelers passenger vehicles and 10 lakh e-2 wheelers.


3. NATRIP scheme:-

The National Automotive Testing and R&D Infrastructure Project (NATRIP) has been setup to enable the industry to adopt global standard and implement global performance standards.

The cost of the project is $573 million. It’s aim is to provide unparalleled strength in IT and electronics with the automotive engineering sectors. As of now, 7 test center have been finalized.


4. National Automobile Scrap Policy:-

The National Scrap Policy objective is to phase out old passenger and commercial vehicle to reduce urban air pollution, increase road safety and to increase sale in automobile sector. This Policy will help in providing boost in sale in Automobile Industry, generate more GST revenue, provide employment, and help in solving the global shortage of semiconductor chip.


5. Automotive Mission Plan 2016-2026:-

The Automobile Industry in Indian is projected to be third largest in the world and to contribute about 12% to Indian GDP. To support the growth the Indian government announced AMP plan in which they focuses to four-fold the growth over a period of 10 year.




Market Share of Companies:-

The market share of companies are divided into each segment wise:-

1. Passenger Vehicles:-





2. Commercial vehicles:-




3. Two Wheelers:-




Key Differentiation:-


1. Pricing and Value for Money:-

As India is a Price Sensitive market pricing plays a critical factor in Indian market. The Automaker who provide price sensitive with competitive product are likely to attract more buyers.


2. Fuel Efficiency and Eco-Friendly Changes:-

Slowly with the help of Government Initiatives the Market of Electric and Hybrid Vehicle is increasing. Indian Government is promoting more buyers by providing exempt in taxes and slowly increasing the awareness of Eco-Friendly vehicles.


3. Brand Reputation and Trust :-

Established brands with a long-standing reputation for reliability quality and customer service tend to have a higher edge in the market.


4. Safety Features and Technological Innovations:-

Vehicles equipped with advanced safety features such as ABS, airbags appeals to consumer. Brands that continuously innovate attract lot of buyers.


Conclusion:-

The Indian automobile Industry stands as a vital pillar of the nation’s economic growth, providing mobility solutions to millions of people and contributing significantly to the country’s development. Amidst opportunities and challenges, the Automobile Industry continues to witness a growth with government policies.


References:-

• https://www.makeinindia.com/sector/automobiles

• https://www.ibef.org/industry/india-automobiles

• https://www.statista.com/statistics/608392/automobile-industry-domestic-sales-trends-india/

• https://www.makeinindia.com/sector/automobiles

• https://www.grandviewresearch.com/industry-analysis/india-automotive-market

• https://yourstory.com/2023/04/indias-automotive-industry-growth-trends-global-prominence



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