Indian Automotive Market on a Confident Growth Path

 In Blog, Indian Market

Indian automotive market has been an attention grabber globally for past few years. India is world’s largest two and three-wheeler manufacturer. Along with that, India is also world’s largest tractor manufacturer and third largest heavy truck manufacturer. As of 2020, India was world’s fourth largest car manufacturer. The country is also world’s second largest bus manufacturer. Due to the combination of a large number of factors including COVID, trade wars, increasing labour costs etc., India’s manufacturing process is going to increase hereon. Similar is going to be the story of Indian automotive market – the consumption side. The year gone by has shown us the worst and the best that can happen with the automotive industry. The pandemic first lead to an unimagined decline in sales and production of vehicles across all the segments. Most of the manufacturers operated their factories at minimal outputs. When everyone was about to lose it, signs of recovery surfaced. In the month of October, many manufacturers logged in record sales figures. During December 2020, Maruti Suzuki registered 19.5% growth in the domestic sales whereas Hyundai sales shot up by 24.89%. MG Motors sold more than 80,000 units in 2020 and has upped its production. French player Citroen is about to enter the Indian market in Feb 2021. Sales of commercial vehicles also followed a similar trend. Ashok Leyland witnessed 14% sales growth in December 2020. December sales, in a way, have redefined the automotive scenario in the country. In the two-wheeler segment, Honda saw its sales going up by 5%. Some manufacturers have already returned near the pre-pandemic production while some had to increase their production to cater to the increased demand. Maruti Suzuki upped its production by 33.78% to meet the growing demands. The pandemic highlighted our dependance on mobility, our urge to get back to the normal. The new decade has already begun and will witness many new milestones in the evolution of mobility.

Expected growth of the market.

As per the statistics available on the “Invest India” website, which is a government portal, the Indian EV market is expected to grow at CAGR of 44% between 2020-2027 and is expected to hit 6.34-million-unit annual sales by 2027. The EV industry will create 50 million direct and indirect jobs by 2030.

India is expected to be the world’s third-largest automotive market in terms of volume by 2026. The $118 billion Automobile industry is expected to reach $300 bn by 2026. India is expected to hold 8% of the global EV 4W components market by 2025. India’s EV lithium-ion battery pack market is expected to grow to USD 300 billion.

Major growth stimuli

 The above paragraph clearly highlights the tremendous growth potential Indian automotive market has. What are the major drivers which will lead to this growth? Here are some of the major growth drivers – at multiple levels – including policies, demographics etc. which will fuel this growth.

 100% FDI allowed under automatic route.

This rule has been made under the Consolidated FDI Policy. As a result of 100% FDI, major projects requiring capex will be expedited.

 Growing income

3X increase in average household income from $6,393 in 2010 to $18,448 in 2020. This trend is expected to grow further which will prepare the financial ground for the demand of automobile under multiple segments.

‘Youngest Nation’ by 2025

India to become the youngest nation by 2025 with an average age of 25 years. This indicates what kind of demand automobiles will witness in India from 2025-2040 as this is the age in which consumers buy and change vehicles at highest frequency.

Vehicle penetration

India is expected to reach 72 vehicles per 1000 people by 2025 striking increase in the sales volume.

Expanding R&D hub

India accounts for 40% of total $31 bn of global engineering and R&D spend. 8% of the country’s R&D expenditure is in the automotive sector.

Atmanirbhar Bharat Abhiyaan – Self Reliant India

Special economic and comprehensive package of INR 20 lakh crores (20 million millions) towards promoting manufacturing in India.

Production-Linked Incentive (PLI) Scheme

Automobile sector have a financial outlay in excess of USD 6 billion under Atmanirbhar Bharat package.

From the above highlights, one can make out that both demand and supply side are going to be growing fast in India within next few years, making India probably the most significant place globally from an automotive point of view.

Growth drivers for EVs

 As everyone is aware, EVs will be primary growth driver in the automotive industry in the coming years. When we are talking about the Indian automotive market and growth drivers, the topic would be incomplete without talking about electric vehicles. The InvestIndia portal has compiled quite a few interesting updates about Indian EV market and here are a few of them:

The Central Government has announced a National Mission on Transformative Mobility and Battery Storage—which plans to drive clean, connected, shared, sustainable and holistic mobility initiatives.  9 States have their own policies to boost growth of EVs.  As per data from government handle, more than 10 companies have recently made considerable investments in the Indian EV market and many more are in the process of doing so.

Flipkart will deploy more than 25,000 electric vehicles by 2030. The company has started deploying two and three-wheeler electric vehicles in multiple locations for delivery across the country, including Delhi, Bengaluru, Hyderabad, Kolkata, Guwahati and Pune.

Under phase-II of FAME (faster adoption and manufacturing of hybrid and electric vehicles), Andhra Pradesh will set up 400 charging stations in 73 locations across the state. Vijayawada, Visakhapatnam, and Tirupati will be declared model electric mobility cities.

Hyundai Motor will invest over INR 32 billion in four years in India to ramp up product portfolio and launch cars, including a series of e-vehicle.

Ampere Electric, the electric-mobility arm of Greaves Cotton, will invest INR 7 billion in a phased manner over 10 years to set up a manufacturing plant at Ranipet in Tamil Nadu. It will have an initial capacity to produce a hundred thousand units in a year.

Ola wants to own the entire value chain—from engineering, manufacturing and sale of electric vehicles (EVs)—beginning with electric two-wheelers and then small electric cars.
Ola Electric’s 500-acre new EV manufacturing site—FutureFactory—near Krishnagiri in Tamil Nadu will have an annual capacity of 10 million units by mid-2022.

Tata Motors-owned Jaguar Land Rover announced plans to become a net zero carbon business by 2039 for which its Jaguar brand will become an all-electric luxury vehicle marque from 2025.

The government will adopt an integrated approach and come out with a policy to make India self-reliant in the area of advanced battery technologies to power electric vehicles and other applications.

Hinduja Group company and Gulf Oil Lubricants India have partnered with Gulf Oil International for investing and exploring opportunities in the electric vehicle charging space.

One of the pre-requisites for the growth of any electric market is the charging infra. Some of the news mentioned above highlight interest from governments as well as private players in building a robust charging infrastructure.

There are many more updates which talk about serious efforts to build up a robust charging infrastructure like  Delhi government’s plan to setup another 100 EV charging stations and Okaya Power getting contract to set up 4,244 EV charging stations. Karnataka has largest number of on road EVs in India and the government has recently proposed to offer 20% subsidy on installation of EV charging stations. The central government has planned for setting up charging infrastructure across 69,000 petrol pumps.

From the above updates and highlights, it is not difficult at all to conclude that when it comes to future of automobiles, India is the land to be. Get in touch with me at to know more about Indian automotive market.

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