Automobile Sector in India - Growth, Investment Opportunities, and Government Initiatives

The Indian automobile industry plays an important role in the country's nation's economy, it contributes approx 7.1% of the GDP and 49% to the manufacturing GDP. It ranks as the fourth-largest vehicle producer in the world and a key player in the global automotive value chain. The sector industry includes vehicle assembly, auto component manufacturing, and has strong linkages with related industries such as electronics, steel, and logistics.

Automobile Sector Overview

The automobile sector shares 6% of India's GDP. During the fiscal year 2023-24, India exported approximately 4.5 million vehicles across various categories, including 6,72,105 passenger cars and 3.45 million 2-wheelers. Leading Global companies such as Skoda Auto and Volkswagen India export nearly 30% of their vehicles, whereas Maruti Suzuki Ships approx 2,80,000 units annually, showing the sector's growth.

Over the past four years, India's automotive sector has attracted $36 Bn in Foreign Direct Investment (FDI), underlining the country's growing importance in the global automotive landscape. Major international players are investing heavily, Hyundai plans a $4 Bn (INR 33,200 Cr) expansion, Mercedes-Benz has committed $360 million (INR 3,000 Cr), and Toyota recently announced a $2.3 Bn (INR 20,000 Cr) investment to grow its capacity. Allowing 100% FDI through the automatic route makes India's automotive sector a more attractive destination for global investors.

Domestic vehicle demand continues to be strong, with over 20 million vehicles registered in 2023. India is also advancing its sustainable mobility, recording more than 4.4 million Electric Vehicles (EVs) by August 2024, including 9,56,000 in the first eight months, achieving a 6.6% market Share. To support this growth, the government has launched many initiatives like the Production Linked Incentive (PLI) Scheme for Advanced Chemistry Cell (ACC) battery storage. For 2024-25, the government allocated INR 2,671.33 Crore under the FAME scheme, proposing customs duties on critical minerals used in EV cell components manufacturing. In addition, in March 2024, the government introduced the Electric Mobility Promotion Scheme (EMPS), allocating INR 500 Crore over four months, to support two- and three-wheeler segments to accelerate the transition to electric vehicles. These efforts coincide with the recent discovery of lithium deposits in Jammu & Kashmir, positioning India to emerge as an important player in the global battery manufacturing sector in the coming years.

Also know about renewable energy sources in India.

Why Invest in an Automobile

Rising Income

India’s per capita Net National Income has increased approximately 35.12%.. In 2014-2015, it had INR 72,805 and INR 23-24 INR 106,744.

Vehicle penetration

Vehicle ownership in India is expected to reach 72 vehicles per 1000 people by 2025.

Advertisment

Expanding R&D hub

India contributes 40% of the global $31 billion expenditure on engineering and R&D.

Atmanirbhar Bharat Abhiyaan - Self-Reliant India

A comprehensive economic package of INR 20 Lakh Crore aimed at boosting manufacturing in India.

Read more - India’s Tier 2 & 3 Cities as Emerging Investment and Growth Hubs

Incentives & Schemes Automobile Sector

The Indian government provides a number of incentives and schemes to strengthen the automobile and auto component sector, primarily through the Production Linked Incentive (PLI) Scheme. It has a total budget of INR 25,938 crore, which is to enhance domestic manufacturing of Advanced Automotive Technology (AAT) products and encourage investments in the industry.

The Indian automobile sector is undergoing major policy changes to boost domestic manufacturing, promote electric vehicles, and advance technology. Important initiatives include the Production Linked Incentive (PLI) scheme, the FAME India scheme, and the National Automotive Testing and R&D Infrastructure Project (NATRIP). These measures are designed to make India a global center for automotive production and research.

Read more - Textile Industry in India.

Conclusion - Automobile Sector

The Indian automobile sector is one of the major contributors in the Indian economy, it helps in creating new jobs and growing the GDP. With the help of government su[support, such as schemes and privacy policies, the sector is growing continuously. India is positioning itself as one of the global leaders in the automotive landscape.

Advertisment

Read more - High Growth Sectors in India.