India Market
India’s Auto Industry
On the canvas of the Indian economy, auto industry occupies a prominent place. Due to its deep forward and backward linkages with several key segments of the economy, automotive industry has a strong multiplier effect and is capable of being the driver of economic growth. A sound transportation system plays a pivotal role in the country's rapid economic and industrial development. The well-developed Indian automotive industry ably fulfils this catalytic role by producing a wide variety of vehicles: passenger cars, light, medium and heavy commercial vehicles, multi-utility vehicles such as jeeps, scooters, motorcycles, mopeds, three wheelers, tractors etc.
The automotive sector is one of the core industries of the Indian economy, whose prospect is reflective of the economic resilience of the country. Continuous economic liberalization over the years by the government of India has resulted in making India as one of the prime business destination for many global automotive players. The automotive sector in India is growing at around 18 per cent per annum.
Automobile Industry was delicensed in July 1991 with the announcement of the New Industrial Policy. The passenger car industry was, however, delicensed in 1993. No industrial licence is required for setting up of any unit for manufacture of automobiles except
in some special cases. The norms for Foreign Investment and import of technology have also been progressively liberalized over the years for manufacture of vehicles including passenger cars in order to make this sector globally competitive. At present 100% Foreign Direct Investment (FDI) is permissible under automatic route in this sector including passenger car segment. The import of technology/technological upgradation on the royalty payment of 5% without any duration limit and lump sum payment of USD 2 million is also allowed under automatic route in this sector. With the gradual liberalization of the automobile sector since 1991, the number of manufacturing facilities in India has grown progressively. At present there are 15 manufacturers of passenger cars & multi utility vehicles, 9 manufacturers of commercial vehicles, 16 of 2/3 wheelers and 14 of tractors besides 5 manufacturers of engines.
The automotive industry comprising of the automobile and the auto component sectors has made rapid strides since delicensing and opening up of the sector to FDI in 1991. The industry had an investment of about Rs. 50,000 crore in 2002-03 which has gone upto Rs. 80,000 crore by the year 2007. The automotive industry has already attained a turnover of Rs. 1,65,000 crore (34 billion USD). The industry provides direct and indirect employment to 1.31 crore people. The contribution of the automotive industry to GDP has risen from 2.77% in 1992-93 to 5% in 2006-07. The industry is also making a contribution of 17% to the kitty of indirect taxes of the Government.
Advantage India
- India holds huge potential in the automobile sector including the automobile component sector owing to its technological, cost and manpower advantage.
- India has a well-developed, globally competitive Auto Ancillary Industry and established automobile testing and R&D centres.
- The country enjoys natural advantage and is among the lowest cost producers of steel in the world.
- India is the world’s second largest manufacturer of two wheelers.
- India is fifth largest manufacturer of commercial vehicles.
- The country manufactures largest number of tractors in the world.
- India is fourth largest passenger car market in Asia.
- World’s largest manufacturer of two wheelers is located in India.
Investment Opportunities
- Establishing Research and Development Centres
- Establishing Engineering Centres
- Passenger Car Segment
- Two Wheeler Segment
- Heavy truck Segment
Production
Automotive industry, one of the largest industries in India, has been witnessing impressive growth during the last two decades.The industry has been able to restructure itself, absorb newer technology, align itself to the global developments and realize its potential.This has significantly increased industry contribution to overall industrial growth in the country. The automobile sector recorded growth of 13.56% in 2006-07. Vehicle production grew at 8.78% in April-May 2008 over April-May 2007.
Automobile Production Trends
(In thousand)
|
Category
|
2006-07
|
2007-08
|
|
Passenger Cars
|
1323
|
1012
|
|
Utility Vehicles
|
222
|
175
|
|
Total Cvs
|
520
|
388
|
|
Total Two Wheelers
|
3,444
|
6029
|
|
Three Wheelers
|
556
|
382
|
|
Grand Total
|
11,065
|
8057
|
|
Growth %
|
13.56
|
(-2.6)
|
Source: Annual Report 2007-08,Ministry of Heavy Industries
Domestic Sales
The growth of the Passenger Vehicles segment during April – July 2008 was 10.97 percent, which is lower than the first quarter growth of 15.08 percent. Passenger Cars grew by 8.91 percent, Utility Vehicles by 16.03 percent and Multi Purpose Vehicles by 24.62 percent in this period.
The overall Commercial Vehicles also grew by 8.00 percent, which is lower than the first quarter growth of 9.59 percent. Medium & Heavy Commercial Vehicles grew at 5.45 percent and Light Commercial Vehicles recorded a growth of 11.13 percent.
Three Wheelers sales recorded improvement in April – July 2008 over the first quarter growth. Three Wheelers sales grew by 3.28 percent. While Passenger Carriers grew by 18.62 percent during April - July 2008, Goods Carriers declined by 21.71 percent.
Two Wheelers also registered higher growth of 9.91 percent during this period than the first quarter growth of 7.15 percent. Motorcycles and Scooters grew by 10.95 percent and 7.03 percent respectively. Mopeds grew by 3.38 percent. Electric two wheelers segment also grew by 20.50 percent.
Exports
The period from April – July 2008 saw automobile exports registering a growth of 23.92 percent, but not all segments registered positive growth.
Passenger Vehicles and Two Wheelers segment grew by 42.66 and 27.04 percent respectively. Exports of Commercial Vehicles segment declined by 4.12 percent. Three Wheelers exports also declined by 10.22 percent in this period.
Auto Components Industry
Surge in automobile industry since the nineties has led to robust growth of the auto component sector in the country. In tandem with the industry trends, the Indian component sector has shown great advances in recent years in terms of growth, spread, absorption of new technologies and flexibility. Indian auto component industry has seen major growth with the arrival of world vehicle manufacturers from Japan, Korea, US and Europe. Today, India is emerging as one of the key auto components center in Asia and is expected to play a significant role in the global automotive supply chain in the near future.
The Auto Component industry is today considered as the sunrise industry with huge growth prospects. This industry is also expected to drive the growth of the engineering sector in view of its strong downstream and upstream linkages with many other segments of the engineering sector like raw materials, capital goods, intermediate products etc. The potential of this sector has been amply highlighted in the Automotive Mission Plan drawn up by the Ministry of Heavy Industries & Public Enterprises. The AMP was unveiled by the Prime Minister in January 2007 and this document lays down the collective Vision of the industry and the Government for 2016 for the automotive industry.
Today, the auto-component industry has emerged as a highly competitive segment of the manufacturing sector. Indian auto component industry is wide (over 400 firms in the organized sector producing practically all parts and more than 10,000 firms in small unorganized sector, in tierized format) and has been one of the fastest growing segments of auto industry. During the year 2006-07, the Auto Component Industry continued its high growth path and emerged as one of the fastest growing sector in Indian Engineering Industry by clocking 21% growth in output during the year. The industry crossed a total turnover of over US $ 15 billion (Rs. 64,500 crore), with exports of US $ 2.9 billion (Rs. 12,643 crore) during the year.It supports industries like automobiles, machine tools, steel, aluminum, rubber, plastics, electrical, electronics, forgings and machining.India has also emerged as an outsourcing hub for auto parts for international companies such as Ford, General Motors, Daimler Chrysler, Fiat, Volkswagon, and Toyota.
As Global OEMs/Tier 1 companies have identified India as a Leading Competitive country for sourcing auto components for their global production, Indian auto component industry’s export scenario is changing very fast; auto component industry’s export growth was 15% in 2006-07.
Policy Initiatives
Automobile Policy 2002
The Automobile Policy 2002 seeks to make India an international hub for manufacturing small affordable passenger cars and a key centre for manufacturing tractors and two-wheelers for sales world wide.
Foreign Direct Investment
- The Indian automotive industry with a turnover of US$ 34 billion and the auto parts industry with a turnover of US$15 billion offer excellent scope for FDI.
- Automatic approval for foreign equity investment upto 100 per cent of manufacture of automobiles and component is permitted.
- The automobile industry is delicensed
- Import of components is freely allowed
Automotive Mission Plan 2016
The Government of India is drawing up an Automotive Mission Plan 2016 (AMP 2016) that aims to make India a global automotive hub. To maintain the high rate of growth of the automotive industry and to retain the attractiveness of Indian market and further enhancing the competitiveness of Indian companies, the Government has prepared the mentioned ten-year Automotive Mission Plan. The idea is to draw a futuristic plan of action with full participation of the stakeholders and to implement it in mission mode to meet the challenges coming in the way of growth of industry. Through this Automotive Mission Plan, Government also wants to provide a level playing field to the players in the sector and to lay a predictable future direction of growth to enable the manufacturers in making a more informed investment decision.
The Automotive Mission Plan (AMP) envisages increase in production of automotive industry from the current level of Rs.169000 crore to reach Rs. 600000 crore by 2016.
Major players in the automobile sector
- Tata
- Mahindra
- Ashok Leyland
- Bajaj
- Hero Honda
- Daimler Chrysler
- Suzuki
- Ford
- Fiat
- Hyundai
- General Motors
- Volvo
- Yamaha
- Mazda
Useful Web Links
Automotive Component Manufacturers Association of India