The Indian automobile industry faces several challenges, such as rising fuel prices, infrastructure constraints, environmental concerns, and competition from global players.
The automobile industry in India has been one of the most significant contributors to the country's economic growth. With a strong domestic market and increasing exports, the industry has become a key driver of the country's industrial development. Over the years, India has emerged as a hub for low-cost production and has attracted several global automotive giants to set up their manufacturing units in the country.
History
It all started in the early 1950s with the establishment of Hindustan Motors, which manufactured the iconic Ambassador car. Until the early 1990s, the industry was dominated by a handful of domestic players who had a near-monopoly in the market. However, with the opening up of the Indian economy in 1991 and the introduction of liberalization policies, the industry witnessed significant changes.
Liberalization
The liberalization of the economy paved the way for the entry of global players, which brought in new technologies, designs, and manufacturing practices. The entry of new players also led to increased competition and better quality products, which benefitted the consumers. The Indian government also introduced several policies to encourage the growth of automobile sector companies, such as tax incentives, reduced import duties, and streamlined regulations.
Present Scenario
The growth acquired during the liberalization period made the automobile sector one of the largest in the world. Its 2020 turnover was USD 118 billion. The sector employs over 35 million people directly and indirectly and contributes nearly 7% to the country's GDP. The sector comprises several segments, including passenger vehicles, commercial vehicles, two-wheelers, three-wheelers, and tractors.
Passenger Vehicles
The passenger vehicle segment in India has witnessed significant growth in recent years. With rising incomes and changing lifestyles, there has been a surge in demand for passenger cars and SUVs. The segment has attracted several global players, such as Suzuki, Hyundai, and Volkswagen, who have set up their manufacturing units in the country. The Indian automobile companies now compete with the top auto-sector firms from across the globe.
Commercial Vehicles
Three-Wheeler Segment
Two-Wheeler Segment
The two-wheeler segment is the most popular in the country, with a massive market share. The segment includes motorcycles, scooters, and mopeds and has been dominated by domestic players such as Hero MotoCorp, Bajaj Auto, and TVS Motor Company. The segment has witnessed significant growth in recent years, driven by rising incomes, improved road infrastructure, and the need for affordable transportation.
Tractors
The tractor segment, which includes agriculture machinery, is a distinct automobile industry in India. The segment has witnessed a rise in demand, driven by the government's focus on increasing agricultural productivity and the need for mechanization. The segment is dominated by domestic players such as Mahindra & Mahindra and TAFE.
The automobile sector in India has shown steady growth over the past few decades, and several factors have contributed to this growth.
Rising disposable income
With a growing economy and increasing disposable income, consumers in India have more money to spend on purchasing vehicles. This has led to a significant increase in the demand for cars, two-wheelers, and commercial vehicles.
Favorable demographics
India has a large and growing population, with a significant proportion of the people in the young age group. This demographic dividend has led to an increase in the number of working-age individuals who require personal transportation, driving the growth of the automobile industry in India.
Government policies and initiatives
The Indian government has introduced several policies and initiatives to support the growth of the automobile industry. These include tax incentives, subsidies for electric vehicles, and investment in infrastructure development.
Low vehicle penetration
Despite the significant increase in the number of vehicles on Indian roads over the past few years, the vehicle penetration rate in India is still low compared to other countries. It presents a significant growth opportunity for the automobile sector companies.
Technology advancements
With increasing access to technology and the availability of more advanced and feature-rich vehicles, consumers in India are becoming more demanding in their expectations from automobile firms. This has led to a significant increase in the demand for vehicles that offer advanced safety features, better fuel efficiency, and connected features.
Increasing urbanization
With a growing urban population, there has been an increase in demand for personal transportation in urban areas. This has led to an increase in the requirement for small and fuel-efficient vehicles made by the top automobile companies in India. They are better suited for city driving.
Export potential
The Indian automobile industry has significant export potential, with several Indian automobile manufacturers exporting their vehicles and components to other countries. This has helped to increase the growth of manufacturing and provide a boost to the Indian economy.
Conclusion
The Indian automobile industry has several growth drivers, including rising disposable income, favorable demographics, government policies and initiatives, low vehicle penetration, technology advancements, increasing urbanization, and export potential. These drivers are expected to continue to fuel the growth of Indian automobile companies in the future, and the industry is expected to play a significant role in the Indian economy.
