1 Year agoThis article is part of the ‘Sector Survey’ series that takes a closer look into each sector identified by the Government of India in the ‘Make in India’ initiative.
The automobile sector of India is one of the largest in the world and accounts for over 7.1% of India’s gross domestic product (GDP).1 It also contributes to nearly 22% of the country’s manufacturing GDP.2 The sector was first opened to foreign direct investment (FDI) in the year 1991 during the liberalisation of the Indian economy and has come a long way since.
The industry produced a total of 23,960,940 vehicles in April-March 2015 as against 23,358,047 in April-March 2014, registering a growth of 2.58% over the same period last year.3 The country is also currently the 6th largest market in the world for automobiles and is expected to become the world's third-biggest car market by the year 2020.4 As per the Automotive Components Manufacturers Association of India (ACMA), the world standings for the Indian automobile sector are as follows:
- Largest tractor manufacturer
- 2nd largest two wheeler manufacturer
- 2nd largest bus manufacturer
- 5th largest heavy truck manufacturer
- 6th largest car manufacturer
- 8th largest commercial vehicle manufacturer
Today, 100% FDI is allowed in the sector through the automatic approval route which means that foreign investors do not require the prior authorization of the Government of India. The impact of this decision can be seen in the data released by Department of Industrial Policy and Promotion (DIPP) which states that the industry has attracted FDI worth USD 15.065 billion during the period April 2000 to March 2016.5
Thus, it can be reasonably concluded that India has emerged as one of the key global players (both as a consumer and a producer) in the automobile industry. It has witnessed tremendous growth, especially in the last few years and has become a base for global manufacturers. Volkswagen, Nissan, Renault, General Motors, Ford, Honda, Suzuki, Hyundai, Daimler, BMW, Skoda, Audi are all present in India and are manufacturing and assembling locally.6 Mercedes-Benz recently decided to make the entry level GLA-class Sport Utility Vehicle (SUV) in India. Japanese two-wheeler manufacturer Honda Motorcycle and Scooter India (HMSI) opened its 4th and world’s largest scooter plant in Gujarat while Chrysler has planned to invest USD 513.5 million in Maharashtra, to manufacture Jeep Grand Cherokee model.7
NEW INITIATIVES & VISION FOR THE FUTURE
The government of India aims to maintain this upward growth trend of the automobile industry and has launched several initiatives to achieve the same.
The Automotive Mission Plan 2016-26 (AMP 2026) is one such initiative. It clearly lays out the government’s collective vision on how the automotive sector should grow regarding size, contribution to national development, technological maturity, global competitiveness and institutional structure. It aims to make India among the top three automotive industries in the world and increase exports exponentially to reach 35-40% of overall output. It also intends to increase its contribution to the GDP to over 12 %, generating 65 million more jobs as well as increasing the size to USD 300 billion by 2026.8
Another initiative launched by the government was the Faster Adoption and Manufacturing of Hybrid and Electric (FAME) India scheme in 2015 with a capital outlay of USD 122.3 million. It is based on NEMMP (National Electric Mobility Plan) 2020 road map and covers all segments i.e. two, three wheelers, cars, LCVs, buses, and all forms of hybrid and pure electric vehicles.9
With the emergence of 5 large automotive clusters in the country i.e. the Delhi-Gurgaon-Faridabad in the north, Sanand-Halol and Mumbai-Pune-Nasik-Aurangabad in the west, Chennai-Bengaluru-Hosur in the south and Jamshedpur-Kolkata in the east, India is fast on its way to becoming the primary global automobile manufacturer. The government of India is more than willing to lead this charge and assist this sector in every way to help it achieve its full potential.
9 PIB, 8th April 2015