Automobile

Summary
  • The Automobile industry in India is a significant driver of macroeconomic growth and technological development.
  • India will be selling 20% blended ethanol, and by 2025.
  • India gets Asia’s longest and world’s fifth-longest High-Speed Track for automobiles.33
  • India is projected to be the world's third-largest automotive market in terms of volume by 2026.2
  • The Automobile industry manufactured 26.36 mn vehicles including passenger vehicles, commercial vehicles, three-wheelers, two-wheelers and quadricycle in FY 2019-20.32
  • The Department of Heavy Industry has helped set up India's first Machine Tool Park Park (TMPT) with a world-class facility that has been developed on 530 acres of land.28 
  • Department of Heavy Industry entails promoting engineering industry viz. machine tools, heavy electrical, industrial machinery and auto industry and administration of 29 CPSEs and 5 autonomous organizations. 32
  • 3.87 lakh Electric Vehicles and 6,740 Electric Buses were sold in India under FAME India Scheme as of August 2021.
  • India is becoming the largest EV market for electronic 2-wheelers, 3-wheelers and cars.
Reasons To Invest
  • India is expected to emerge as the third-largest Automotive market in the world in terms of volume by 2026, followed by China and USA.6
  • As per the AMP 2026, the Automobile industry has a target to triple the revenues to USD 300 Bn and increase exports sevenfold to USD 80 Bn.8
  • India’s “Make in India” initiative has played a vital role in elevating the country’s position.9
  • The need for a quick roll-out of Flex-Fuel Vehicles (FFVs) capable of running on 100% ethanol and gasoline into the Indian auto market within a year’s time, vis-à-vis successful available technologies in Brazil and USA .
  • The International Centre for Automotive Technology (ICAT) is a top-class automotive testing, certification and R&D service provider under the support of NATRiP (National Automotive Testing and R&D Infrastructure Project), Government of India. ICAT is situated in the northern automotive hub of India in Manesar.10
  • BHEL has spent around INR 30 cr on R&D expenditure and filled 34 patents/copyrights.31
  • The Gross Value Added (GVA) in the automobile manufacturing sector witnessed an estimated growth rate of 8.1% in 2018-19.29
  • Ministry of Heavy Industries issued a Public Procurement (Preference to Make in India) Order, 2017 – Notifying Automobile and Automotive Components in furtherance of the order for production.28 
  • BHEL supplied the Steam Turbine and Generator package for the project India's first of its kind, highest rated, 700 MWe Pressurized Heavy Water Reactor.30
Recent Announcements

15th September 2021: Government has approved Production Linked Incentive (PLI) Scheme for Auto Industry, PLI Scheme for auto sector will bring fresh investments of over₹42,500 crore in five years and incremental production of over ₹ 2.3 lakh crore.

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05th September 2021: Power Grid Corporation of India Limited (POWERGRID), has laid the foundation stone for first ever Electric Vehicle Charging Station (EVCS) in the state of Meghalaya at its office complex at Lapalang, Shillong.

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13th August 2021: PM launched Vehicle Scrappage Policy which is a significant milestone in India’s development journey.

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03rd August 2021: Under the Scheme on ‘Enhancement of Competitiveness in Indian Capital Goods Sector in the financial year 2020-21 utilized INR 54.22 crore.

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29th June 2021: Ministry of Road Transport and Highways has issued a draft notification dated 28th June 2021, notifying mass emission standards for E 12( blend of 12% ethanol in gasoline) & E 15 fuels , thereby facilitating their use as automotive fuels.

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Statistics
  • The Automobile industry can be categorized into subsectors such as passenger vehicles, commercial vehicles, three-wheelers and two-wheelers. Two-wheelers occupy the dominant position, constituting about 80% market share and overall passenger vehicles comprise 13%.
  • India is the largest manufacturer of 2W and 3W and the 4th largest manufacturers of passenger cars in the world.32
  • Indian Automobile Industry today is 119 bn USD industry during 2018-19.32
  • Automobile industry turnover constitutes 7.1% of GDP, 27% of Industrial GDP and 49% of Manufacturing GDP and provides about 37 mn direct and indirect jobs.32
  • The current annual sale of vehicles is about 26 mn.32
  • The current annual sale of vehicles of all categories is expected to reach 84.5 million by 2030.13
  • Category wise production Statistics (mn units) in the year 2018-19 showing world-wise ranking in manufacturing of 2W is 1st, 3W is 1st, 4W Passenger Car is 4th and Commercial Vehicles is 7th.32 
  • By 2026, as per the Automotive Mission Plan 2016-26, the Automobile industry has the potential to contribute about 12% of total GDP and create 65 mn jobs.14
FDI Policy
  • Under the automatic route, 100% Foreign Direct Investment (FDI) is permitted along with full delicensing. Hence, making it easy for investors to set up their manufacturing plant/shop in India.
  • The cumulative FDI equity inflow in the Automobile industry is USD 30,513.51 mn during the period of April 2000 to June 2021. This constitutes 5.58% of the total FDI inflow received across sectors.15
  • Automobile Industry’ has emerged as the top sector during the first three months of F.Y. 2021-22 with 27% share of the total FDI Equity inflow.

Read more about Foreign Direct Investment Policy in India >

Production Linked Incentive (PLI) Scheme

The Union Cabinet chaired by the Prime Minister, Shri Narendra Modi has given its approval to introduce the Production-Linked Incentive (PLI) Scheme in the Automobile and Auto Components sectors for Enhancing India’s Manufacturing Capabilities and Enhancing Exports – Atmanirbhar Bharat.

Financial Outlay- INR 57,042 cr

For more details on PLI Schemes, Click Here

Sector Policy

Fame India Scheme II Phase32

  • The Fame India Scheme II is proposed to be implemented over a period of 3 years with a financial outlay of INR 10,000 cr, for faster adoption of electric mobility and growth of electric and hybrid technology to improve the eco-system in the country.
  • The Scheme aims to create demand by way of supporting 7000 e-Buses, 5 lakh e-3 Wheelers, 55000 e-4 Wheeler Passenger Cars and 10 lakh e-2 Wheelers.32
  • India to 41 is No. 2 after China in Electric Vehicles, especially Buses.32
  • Department of Heavy Industries (DHI) is the nodal Department, responsible for planning, implementation and review of the scheme.16
  • Under FAME Scheme, INR 756.66 cr was allocated and INR 53.27 cr utilized till June 2021.
  • Under Phase-II of FAME India Scheme by way of Demand Incentive 92,393 Electric Vehicles supported amounting to about INR 278 cr.
  • 50 additional electric buses were sanctioned in the city of Kevadiya for deployment.
  • Total 3.86 Lakh, Electric Vehicles Sold in India under FAME India Scheme on July 2021

Automotive Mission Plan 2016-26 (AMP 2026)32

  • The Automotive Mission Plan 2016-26 (AMP 2026) outlines the trajectory of growth of the automotive ecosystem in India, including the glide path of definite regulations and policies that govern research, design, technology, testing, manufacturing, import/ export, sale, use, repair, and recycling of automotive vehicles, components and services.
  • The Automobile industry is projected to be the third-largest in the world, contributing 12% to GDP.32
  • The industry has the potential to generate USD 300 Bn revenue and 65 mn additional jobs by 2026.21
  • The Automobile industry is one of the prime movers of the manufacturing sector and the “Make in India” initiative. It aims to increase exports of vehicles by five times. 
  • The plan also foresees India to be the first in the world in the production/sale of small cars, two-wheelers, three-wheelers, tractors and buses; and third in passenger vehicles and heavy trucks.

Draft National Automotive Policy 201832

  • Department of Heavy Industries formulated a draft National Automotive Policy, for the holistic development of the Automobile industry in India.
  • The policy estimates to scale up exports to 35-40% of the overall output and makes India one of the major automotive export hubs in the world. Thus, the following propositions are made in the policy:
    • Adopt a long-term roadmap for emission standards beyond BSVI and complement the same with the global standards by 2028.
    • Rollout CAFÉ (Corporate Average Fuel Efficiency) norms till 2025.
    • Adoption of a differential taxation method based on a composite criterion, including parameters such as CO2 emissions and length.
    • Associate AIS and BIS standards on safety-critical parts over the next 3 years.
    • Fast track adoption of Bharat New Vehicle Safety Assessment Program.

National Automotive Testing and R&D Infrastructure Project (NATRIP)

  • The project has been set up at a total cost of USD 573 Mn to enable the industry to adopt and implement global performance standards.
  • It aims at converting India’s unparalleled strengths in IT and electronics with the automotive engineering sectors.22
  • The main area of focus is on providing low-cost manufacturing and product development solutions.
  • Ministry of Heavy Industries & Public Enterprises has constituted NATRIP Implementation Society (NATIS), an autonomous body, for the execution of NATRIP.23
  • As a part of the program, 7 test centres have been finalized to set up the test facilities – iCAT, GARC, NATRAX, ARAI, VRDE, NIAIMT, NCVRS.24

National Electric Mobility Mission Plan 2020 (NEMMP)

  • The NEMMP initiative has been taken up to encourage consistent, affordable and competent xEVs (hybrid and electric vehicles) that meet consumer performance and price expectations through government-industry collaboration.
  • Promotion and development of indigenous manufacturing capabilities, required infrastructure, consumer awareness and technology are additional objectives of NEMMP 2020.
  • policies aimed at gradually ensuring a vehicle population of about 6-7 mn electric/hybrid vehicles in India by the year 2020 along with a certain level of indigenisation of technology, thereby ensuring India’s global leadership in some vehicle segments.32

Production Linked Incentive (PLI) Scheme

  • Hon’ble Prime Minister, Shri Narendra Modi has given its approval to introduce the Production-Linked Incentive (PLI) Scheme in Automobile and Automobile Components Sector through the Department of Heavy Industries of with a financial outlay of INR 57,042 cr over a five-year period for Enhancing India’s Manufacturing Capabilities and Enhancing Exports – Atmanirbhar Bharat.
  • Two key products are Automobile and Automobile Components. 

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Explore Government policies/schemes in the Automobile sector >

Financial Support

R&D Incentives for Industry and Private Sponsored Research

  • A weighted tax deduction is given under section 35 (2AA) of the Income Tax Act. A weighted deduction of 200% is granted to assess for any sums paid to a national laboratory, university or technological institute. The said sum is used for scientific research within a program approved by the prescribed authority.

Manufacturers with In-house R&D Centre

  • Section 35 (2AB) of the Income Tax Act 26, 1961 provides a weighted tax deduction of 150% of the expenditure incurred by a specified company, on scientific research in the in-house R&D centres as approved by the prescribed authority. This does not include expenditure on the cost of any land or building. The weighted tax deductions of 150% are effective until 31 March 2020. Consequently, the weighted tax deductions will be 100%.

State Incentives

  • Apart from the mentioned incentives, each state in India offers additional incentives for industrial projects. Incentives are provided in the following: rebates in land cost, relaxation in stamp duty exemption on sale or lease of land, power tariff incentives, a concessional rate of interest on loans, investment subsidies/tax incentives, backward areas subsidies, special packages for mega projects. Few examples are -

Andhra Pradesh

  • The government of Andhra Pradesh is committed to providing land at concessional rates, along with 24 hours nonstop power supply.
  • Capital subsidy of 50% for common infrastructure in auto clusters and ASMC developers, up to a maximum of USD 3.07 Mn.
  • Financial assistance limited to 75% of the cost, subject to a maximum of USD 38,461 for obtaining patent registration. While 50% of all charges are subject to a maximum of USD 7,692 paid for obtaining quality certification. This is applicable to only MSME units.
  • Under marketing incentives, 50% of participation cost with a maximum amount of USD 7,692 to be reimbursed to at the most 10 MSME units annually, for participating in international trade fairs.

Gujarat

  • Auto component manufacturers can either avail general incentives under the Gujarat Industrial Policy 2015, or incentive under Mega / Innovative Projects.

Jharkhand

  • Jharkhand introduced the Automobile and Auto Component Policy 2016 with an aim to make Jharkhand, a preferred destination for automobile and auto-component manufacturing units. Provision of financial assistance of 50% for fixed capital investments in building and common infrastructure up to a maximum of USD 3.07 Mn. 100% electricity duty exemption shall be provided for 10 years from the date of production.

Export Incentives

  • Under the Merchandise Export Incentive Scheme (MEIS), automobile manufacturers get a benefit of 2% on vehicle exports.
  • About 20 tariff headings have been considered as “Sensitive items” to be maintained in the negative list of India in most of the trade agreements.

Area Based Incentives

  • Incentives for units in SEZ/NIMZ as specified in respective acts or the setting up of projects in special areas like the Northeast, Jammu & Kashmir, Himachal Pradesh and Uttarakhand.
Imvestment Opportunities
  • Passenger vehicles: passenger cars, utility vehicles, multi-purpose vehicles.
  • Two-wheelers: mopeds, scooters, and motorcycles.
  • Three-wheelers: passenger carriers, goods carriers.
  • Commercial vehicles: light commercial vehicles, medium and heavy commercial vehicles.
  • Huge demands for low-cost electric vehicles that are suited for safe short-distance urban commutes (averaging 50-100 km/trip) that are rugged enough to perform reliably through India's summers and monsoon. 

 

Explore projects to invest in Automobile sector >  

Foreign Investors
  • BMW (Germany)
  • Borgward Automotive India Private Limited (Germany)27
  • Daimler India Commercial Vehicles Pvt Ltd (Germany)
  • FIAT (Italy) Ford (USA)
  • General Motors (USA)
  • Honda (Japan)
  • Hyundai (South Korea)
  • Kia Motors (South Korea)27
  • Mercedes (Germany)
  • Nissan (Japan)
  • Piaggio (Italy)
  • Renault (France)
  • Sumitomo Corporation (Japan)27
  • Suzuki (Japan)
  • Toyota (Japan)
  • Volkswagen (Germany)
  • Volvo (Sweden)
Agencies
Sources
  1. “Year Ender 2019 Ministry of Heavy Industry”, PIB, https://pib.gov.in/PressReleseDetailm.aspx?PRID=1597099 
  2. Mckinsey & Company, The future of mobility in India’s passenger vehicle market, https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/the-future-of-mobility-in-indias-passenger-vehicle-market 
  3. Department of Heavy Industries, Annual Report, https://dhi.nic.in/writereaddata/DHI_2018-19_annual_report/ENGLISH/mobile/index.html 
  4. Society of Indian Automobile Manufacturers, Automobile Export Trends, http://www.siamindia.com/statistics.aspx?mpgid=8&pgidtrail=15 
  5. Factsheet on FDI - April 2000 to March 2020Department for Promotion of Industry and Internal Trade, https://dipp.gov.in/sites/default/files/FDI_Factsheet_March20_28May_2020.pdf
  6. Society of Indian Automobile Manufacturers, Automotive Mission Plan 2016-26: A curtain raiser, http://www.siam.in/cpage.aspx?mpgid=16&pgid1=17&pgidtrail=83
  7. “Automotive Mission Plan”, PIB website, Ministry of Heavy Industries & Public Enterprises, https://pib.nic.in/PressReleasePage.aspx?PRID=1593562
  8. Mckinsey & Company, The future of mobility in India’s passenger vehicle market, https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/the-future-of-mobility-in-indias-passenger-vehicle-market
  9. Mckinsey & Company, The future of mobility in India’s passenger vehicle market, https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/the-future-of-mobility-in-indias-passenger-vehicle-market 
  10. Press Information Bureau, Ministry of Heavy Industries & Public Enterprises - ICAT - A World Class Automotive Testing Centre, https://pib.gov.in/Pressreleaseshare.aspx?PRID=1571387  
  11. “Year Ender 2019 Ministry of Heavy Industry”, PIB, https://pib.gov.in/PressReleseDetailm.aspx?PRID=1597099   
  12. “Year Ender 2019 Ministry of Heavy Industry”, PIB, https://pib.gov.in/PressReleseDetailm.aspx?PRID=1597099  
  13. “Year Ender 2019 Ministry of Heavy Industry”, PIB, https://pib.gov.in/PressReleseDetailm.aspx?PRID=1597099 
  14. Indo American Chamber of Commerce, IACC Automotive and Auto Ancillaries Forum, https://www.iaccindia.com/automotive/ 
  15. Factsheet on FDI - April 2000 - June 2021, Department for Promotion of Industry and Internal Trade, https://dpiit.gov.in/sites/default/files/FDI_Factsheet_June2021.pdf
  16. Department of Heavy Industries, Office Memorandum, https://dhi.nic.in/writereaddata/UploadFile/publicationNotificationFAME%20II%208March2019.pdf 
  17. "Indian Automobile Industry – Update", Emerging Markets Information Service (EMIS) 
  18. "Year End Review 2018 – Ministry of Heavy Industries & Public Enterprises", PIB,  https://pib.gov.in/Pressreleaseshare.aspx?PRID=1557431 
  19. "Year End Review 2018 – Ministry of Heavy Industries & Public Enterprises", PIB, https://pib.gov.in/Pressreleaseshare.aspx?PRID=1557431 
  20. "Automotive Mission Plan 2016-26: A curtain raiser", Society of Indian Automobile Manufacturers, http://www.siam.in/uploads/filemanager/47AUTOMOTIVEMISSIONPLAN.pdf
  21. "Automotive Mission Plan 2016-26: A curtain raiser", Society of Indian Automobile Manufacturers, http://www.siam.in/uploads/filemanager/47AUTOMOTIVEMISSIONPLAN.pdf
  22. Secunded European Standardization Expert in India, Indian Automobile Industry, http://www.sesei.eu/wp-content/uploads/2018/12/Automotive-Sector-Report_-Final.pdf 
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  32. Annual Report, https://dhi.nic.in/writereaddata/UploadFile/AR2019_20E.pdf
  33. PIB Release,  https://www.pib.gov.in/PressReleasePage.aspx?PRID=1731122

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