Automobile Industry

The automobile industry is crucial to both macroeconomic expansion and technological advancement; it has historically been a reliable barometer of how the Indian economy is performing. 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.
Blog - Automobile Industry
The demand for commercial vehicles is developing as a result of expanding passenger and logistical sectors. New trends, such as the electrification of vehicles, especially three-wheelers and small passenger cars, are expected to fuel market expansion in the future. India enjoys a strong position in the global heavy vehicles market as
it is the largest tractor producer, second-largest bus manufacturer, and third-largest heavy truck manufacturer in the world. India’s annual production of automobiles in FY22 was 22.93 million vehicles. India is also a prominent auto exporter and has strong export growth expectations for the near future.
In addition, several initiatives by the Government of India such as the Automotive Mission Plan 2026, scrap page policy, and production-linked incentive scheme in the Indian market are expected to make India one of the global leaders in the two-wheeler and four-wheeler market by 2022.
The Indian passenger car market was valued at US$ 32.70 billion in 2021, and it is expected to reach a value of US$ 54.84 billion by 2027 while registering a CAGR of over 9% between 2022-27. The electric vehicle (EV) market is estimated to reach Rs. 50,000 crore (US$ 7.09 billion) in India by 2025.A study by CEEW Centre for Energy Finance recognised a US$ 206 billion opportunity for electric vehicles in India by 2030.
This will necessitate a US$ 180 billion investment in vehicle manufacturing and charging infrastructure. According to NITI Aayog and the Rocky Mountain Institute (RMI), India's EV finance industry is likely to reach Rs. 3.7 lakh crore (US$ 50 billion) by 2030. A report by the India Energy Storage Alliance estimated that the EV market in India is likely to increase at a CAGR of 36% until 2026.
In addition, the projection for the EV battery market is expected to expand at a CAGR of 30% during the same period. Indian automotive industry is targeting to increase the export of vehicles by five times during 2016-26. In FY22, total automobile exports from India stood at 5,617,246.


Some of the recent/planned investments and developments in the automobile sector in India are as follows:
In January 2023, MG Motor India to invest US$ 100 million to expand capacity, eyes 70 percent growth in 2023.
In December 2022, Mahindra & Mahindra to invest Rs 10,000 crore (US$ 1.2 billion) for an EV manufacturing plant in Pune.
In November 2022, Maruti Suzuki India announced plans to spend nearly Rs. 7,000 crore (US$ 865.12 million) on several projects this year, including the building of its new facility in Haryana and the introduction of new models.
In October 2022, the total production of passenger vehicles*, three wheelers, two wheelers, and quadricycles was 2,191,090 units.
In October 2022, Maruti Suzuki was India’s biggest car seller, with 136,700 units sold.
In October 2022, Hero MotoCorp sold 507,587 two-wheelers, the highest in the segment, which gave it a market share of 32.31%.
In September 2022, Maruti Suzuki launched the Grand Vitara at a starting price of Rs. 10.45 lakh (US$ 12,915).
In September 2022, Hero MotoCorp announced an investment of US$ 60 million in California-based Zero Motorcycles to collaborate on the development of electric motorcycles.
In August 2022, Volkswagen Group's Indian subsidiary, Skoda Auto Volkswagen India, has begun a feasibility study for its next phase of investment in India after rolling out its India 2.0 strategic plans.
In July 2022, TVS Motor lines up fresh investments of Rs 1,000 crore in EV push.
In April 2022, Tata Motors announced plans to invest Rs. 24,000 crore (US$ 3.08 billion) in its passenger vehicle business over the next five years.
In March 2022, MG Motors, owned by China's SAIC Motor Corp, announced plans to raise US$ 350-500 million in private equity in India to fund its future needs, including EV expansion.
In March 2022, Hyundai plans US$ 79.2 billion investment through 2030, to focus majorly on EVs.
In February 2022, a memorandum of understanding (MoU) was signed between electric two-wheeler company Ather Energy and Electric Supply Companies (ESCOMs) of Karnataka for setting up 1,000 fast charging stations across the state.
In February 2022, Tata Power and Apollo Tyres Ltd announced a strategic partnership for the establishment of 150 public charging stations across India.
In January 2022, Kinetic Green Energy announced plans to invest Rs. 80-100 crore (~US$ 10-13 million) in a two-wheeler EV project, in collaboration with Chinese EV major Aima Technology Group.
Two-wheeler EV maker HOP Electric Mobility, a diversified business venture of Rays Power Infra, is looking at investing Rs. 100 crore (US$ 13.24 million) over the next two years to expand manufacturing capacity for its EVs.
Investment flow into EV start-ups in 2022 (until September 15) has raised funds worth around US$ 673 million, according to Fintrackr.
In December 2021, TVS Motor Company and BMW Motorrad, announced a partnership in the two-wheeler EV space, with plans to release their first electric two-wheeler within the next two years.
In December 2021, Hyundai announced plans to invest Rs, 4,000 crore (US$ 530.25 million) in R&D in India, to launch six EVs by 2028.
A cumulative investment of Rs. 12.5 trillion (US$ 180 billion) in vehicle production and charging infrastructure would be required until 2030 to meet India’s EV ambitions.

Government Initiatives

The Government of India encourages foreign investment in the automobile sector and has allowed 100% FDI under the automatic route. Some of the recent initiatives taken by the Government of India are:
In July 2022, Gujarat government announced a semiconductor policy, where it will set up Dholera Semicon City and offered incentives for investment in this sector.
In July 2022, the Government amended the National Policy on Biofuels – 2018. The target of 20% blending of ethanol in petrol and 5% blending of biodiesel in a diesel by 2030 was brought forward to 2025-26.
As of July 15, 2022, under the FAME India Scheme I & II, a total of 532 EV charging stations have been installed by oil companies under the Ministry of Petroleum and Natural Gas (MoPNG).
In February 2022, Mr. Nitin Gadkari, Minister of Road Transport and Highways, revealed plans to roll out Bharat NCAP, India’s own vehicle safety assessment program.
In February 2022, 20 carmakers, including Tata Motors Ltd, Suzuki Motor Gujarat, Mahindra and Mahindra, Hyundai, and Kia India Pvt Ltd was chosen to receive production-linked incentives (PLI) as part of the government's plan to increase local vehicle manufacturing and attract new investment. The 20 automobile companies have proposed a total investment of around Rs. 45,000 crore (US$ 5.95 billion).
In the Union Budget 2022-23, the government laid out the following initiatives:
The government introduced a battery-swapping policy, which will allow drained batteries to be swapped with charged ones at designated charging stations, thus making EVs more viable for potential customers.
India’s National Highways would be expanded by 25,000 km in 2022-23 under the Prime Minister’s Gati Shakti Plan.
In November 2021, the Union Government added >100 advanced technologies, including alternate fuel systems such as compressed natural gas (CNG), Bharat Stage VI compliant flex-fuel engines, electronic control units (ECU) for safety, advanced driver assist systems and e-quadricycles, under the PLI scheme for automobiles.
In September 2021, Minister of Road Transport and Highways, Mr. Nitin Gadkari, announced that the government is planning to make it mandatory for car manufacturers to produce flex-fuel engines after getting the required permissions from the Supreme Court of India.
In September 2021, the Indian government issued a notification regarding a PLI scheme for automobile and auto components worth Rs. 25,938 crore (US$ 3.49 billion). This scheme is expected to bring investments of over Rs. 42,500 (US$ 5.74 billion) by 2026 and create 7.5 lakh jobs in India.
In August 2021, Prime Minister Mr. Narendra Modi launched the Vehicle Scrappage Policy, which aims to phase out old polluting vehicles in an environmentally safe manner.
The Indian government has planned US$ 3.5 billion in incentives over five years until 2026 under a revamped scheme to encourage the production and export of clean technology vehicles.
In July 2021, India inaugurated the NATRAX, which is Asia’s longest high-speed track and the fifth largest in the world.
As of June 2021, Rs. 871 crore (US$ 117 million) have been spent under the FAME-II scheme, 87,659 electric vehicles have been supported through incentives, and 6,265 electric buses have been sanctioned for various state/city transportation undertakings.
In May 2021, the Central Government approved a PLI scheme for manufacturing Advanced Chemistry Cells (ACC) with a budget of Rs. 18,100 crore (US$ 2.33 billion). In March 2022, four firms, namely Reliance New Energy Solar Limited, Ola Electric Mobility Private Limited, Hyundai Global Motors Company Limited, and Rajesh Exports Limited, were elected to receive the incentives.

Road a Head

The automobile industry is dependent on various factors such as the availability of skilled labour at low cost, robust R&D centres, and low-cost steel production. The industry also provides great investment opportunities and direct and indirect employment to skilled and unskilled labour. The electric vehicles industry is likely to create five crore jobs by 2030.
In August 2022, the Indian government launched India’s first double-decker electric bus in Mumbai. Looking long term, the government feels it is necessary to overhaul the country’s transportation system. It is working to create an integrated electric vehicle (EV) mobility ecosystem with a low carbon footprint and high passenger density with an emphasis on urban transportation reform. The government's strategy and policies are intended to promote greater adoption of electric vehicles in response to growing customer demand for cleaner transportation options.
The Government of India expects the automobile sector to attract US$ 8-10 billion in local and foreign investments by 2023. India could be a leader in shared mobility by 2030, providing opportunities for electric and autonomous vehicles.

The Indian auto industry is expected to record strong growth in 2022-23, post recovering from the effects of the COVID-19 pandemic. Electric vehicles, especially two-wheelers, are likely to witness positive sales in 2022-23.