India has big plans for the future, one of which is to become the world’s largest automaker by 2029. Union Minister Nitin Gadkari said the rise of India’s auto sector to the number one position will coincide with the country becoming the world’s third largest economy. By 2029.
India is already the world’s third largest automobile market after China and the United States. Currently, the share of “Made in India” cars distributed around the world is increasing. 2023 was a special year for the automotive industry, with exports recording a growth of his 4%. Effectively, India’s automobile exports increased to 671,384 units in 2023.
This growing momentum appears to have convinced the Narendra Modi government that its goal of turning India into the world’s largest automaker is well within its reach.
Gadkari last week laid out the fundamental pillars for the growth of India’s auto sector. The center is currently focused on building a world-class road network, transitioning to alternative fuels and reducing logistics costs to boost exports.
India’s desire to emerge as a world leader in alternative and cleaner fuels is particularly noteworthy. The central government is keen to diversify from fossil fuels, whose import costs amount to Rs 16 billion annually.
Gadkari said the government is working with Indian Oil Corporation in Panipat on a project to produce ethanol and bio-asphalt using rice straw. Prime Minister Narendra Modi also called on the auto industry to ensure the availability of Indian-made cars in most of the global markets.
He also spoke about the emergence of a new middle class who have just risen from poverty and are looking to purchase vehicles to meet their mobility requirements. The automotive sector contributes 46% to manufacturing GDP, 7% to national GDP and provides direct employment to approximately 1.5 million people. Therefore, expanding this sector and making it a dominant player globally is imperative for a country like India, which aspires to become a developed country in the next two decades.
The Prime Minister did not talk about increasing India’s automobile exports to the world without good reason. Changes in global supply chains, especially the departure from China, have put India in an advantageous position. India’s auto sector could generate an additional $400 billion in revenue by 2035 by focusing on making its exports more globally competitive, according to a report released by consulting firm Arthur D. Little.
The report says India has the potential to become an auto export-driven powerhouse worth $1 trillion as the world looks for a strong alternative to China. India’s auto sector, currently valued at $250 billion, is already on track to reach a valuation of $600 billion by 2035.
The numbers stack up: An indicator of India’s improvement in automotive technology
Last year, Indians bought a record number of cars, giving the industry plenty of reasons to celebrate. Additionally, sales of luxury cars in India are also increasing. Young people are driving growth in this segment, summarizing the broader trend of a strong economy in the country and an overall increase in incomes.
These trends have led global automakers to look at India as their next export hub. Last year, Toyota, Volkswagen, Hyundai, Mahindra, Tata Motors, Honda and Skoda all posted significant increases in exports, even as Maruti Suzuki remained the biggest brand bringing Indian cars to the rest of the world. Recorded.
According to data provided by Jato Dynamics, Maruti Suzuki achieved another milestone by exporting 261,700 passenger vehicles, including cars and SUVs. Similarly, Volkswagen’s exports increased by 29%, while Skoda’s exports increased by 431% last year to 1,530 vehicles.
2023 was also the year when a record number of cars were sold in the country. According to industry estimates, about 4.5 million passenger cars were sold in the domestic market last calendar year, an increase of about 8.2% compared to 2022’s sales of 3.79 million cars. Maruti Suzuki accounted for nearly 40% of his sales. Meanwhile, Hyundai Motor India sold 6 million cars in the country, which was a record for the company.
India already has the production capacity to achieve its goal of becoming the world’s automobile manufacturing hub. India’s total automobile production in 2023 was approximately 25.93 million units, a significant increase from the previous year. China, currently the world’s largest automaker, produced nearly 30 million cars last year. Although the difference of approximately 4 million people is not small, it does not mean that India cannot break through within the next five years.
Expanding exports and India’s growing appetite for a “new middle class” will play a key role in India defeating not only China but also the United States. Logistics costs in India are estimated to be reduced by around 9 percent by the end of 2024. As a result, exports are expected to increase by 1.5 times.
With these numbers in mind, India hopes to achieve its goals in the next five years and overtake China as the world’s largest automaker. Don’t look at the vehicle as a single entity.
In fact, there is a dedicated industry working behind the scenes that provides the nuts and bolts to Indian automakers. This is the Indian auto parts industry, which has written a history in itself. Around 50% of India’s manufacturing GDP comes from the automobile sector.
The share of the auto parts industry in this field cannot be ignored. In 2023, the auto parts industry recorded record sales of 5.6 billion rupees ($69.7 billion), growing 32.8% year-on-year.
Domestically, sales of auto parts to original equipment manufacturers (OEMs) rose 39.5% to Rs 4,760 crore in the last fiscal.
Why is India’s auto sector growing so fast?
Automakers are getting a boost from the Centre’s performance-linked incentive (PLI) scheme, which was extended for another year on January 1. The total expenditure of this scheme has increased to Rs 25,938 crore. The incentives as part of this scheme will be available from FY24 to FY28 whereas in the previous scheme period he was available from FY23 to FY27.
The scheme for the auto sector has attracted a proposed investment of Rs 67,690 crore, higher than the original target estimate of Rs 42,500 crore. Rs 13,037 million has already been invested in the scheme, which is expected to create jobs worth Rs 1,480 million.
The PLI scheme aims to overcome the industry’s cost hurdles in manufacturing advanced automotive technology products in India. This incentive structure aims to encourage domestic industry to make new investments in the country’s global supply chain for advanced automotive technology products.
At the same time, the PLI scheme of Advanced Chemical Cells (ACC) and Rapid Adoption of Electric Vehicle Manufacturing (FAME I & II) will help India move away from the traditional fossil fuel-based vehicle transport system to an environmentally clean, sustainable and advanced and helps us move to a more efficient system. Electric car.
India recorded a significant increase in EV sales last year, with over 1.5 million units sold, a 50% increase from 2022. The overall share of EVs in India’s car sales jumped from 1.75% in 2021 to 6.38% in 2023. This shows that EVs are gaining more support among the Indian car buying population. The goal of adding more than 2 million EVs to the domestic market this year looks likely to be easily achieved.
Here are the roles that government intervention is playing in the automotive sector.
Since its establishment in 2019, FAME II has supported the sale of approximately 1.2 million electric motorcycles, 141,000 three-wheelers, and 16,991 four-wheelers through subsidies.
Experts predict that 94,000 billion rupees ($12.6 billion) will be invested in the electric vehicle ecosystem over the next five years.
The Indian EV market is expected to grow at a compound annual growth rate of 49%, with annual sales expected to reach nearly 10 million units by 2030.
The government’s far-reaching plans to make India a global manufacturing hub will remain incomplete until the full potential of India’s auto industry is realized. To this effect, Commerce and Industry Minister Piyush Goyal in January asked the auto industry to set a target to increase the share of exported cars to 50% of all domestically produced passenger cars by 2030.
In the previous fiscal year, that percentage was about 14%. The Minister pointed out very specifically that the industry should not just limit himself to achieving an export share of 25%, but should aim for a higher share.