The $ 93 billion automotive industry contributes 7.1% to India’s GDP

India Infoline News Service | Mumbai | November 25, 2016 13:12 IST

India is the largest tractor manufacturer, 2nd largest two- wheeler manufacturer, 2nd largest bus manufacturer, 5th largest heavy truck manufacturer, 6th largest car manufacturer and 8th largest commercial vehicle manufacturer.

The automotive industry in India has been on a growth trajectory with impressive spikes in sales, production, and exports over the last two years. With an average production of around 24 million vehicles annually and employer of over 29 million people (direct and indirect employment), the automotive sector in India is one of the largest in the world.

India
is the largest tractor manufacturer, 2nd largest two- wheeler manufacturer, 2nd largest bus manufacturer, 5th largest heavy truck manufacturer, 6th largest car manufacturer and 8th largest commercial vehicle manufacturer.

For every vehicle produced, direct and indirect employment opportunities are created with employment of 13 persons for each truck, 6 persons for each car and 4 for each three- wheeler and one person for two-wheelers.  The $ 93 billion automotive industry contributes 7.1% to India’s GDP and almost 49% to the nation’s manufacturing GDP (FY 2015-16).
 
As a major employment generator, GDP contributor and FDI earner, the automotive industry is instrumental in shaping the country’s economy and hence regarded as a 'Sunrise sector' under Make in India.
 
In order to further promote the sector, initiatives are being undertaken by the Government of India to promote innovation and R&D and create a favourable policy regime to make India a prominent manufacturing destination.
 
The Automobile Mission Plan 2016 2026 envisages creating India as one of the top three automobile manufacturing centres in the world with gross revenue of US $ 300 bn by 2026.

Policy Initiatives & Investments Major Investments and FDI Inflows FDI Inflow

The Automobile industry witnessed a US $ 5.5 bn of FDI inflow into the country during April 2014 to March 2016.
 
Some of the major foreign investments are listed in the Annexure I.

Infrastructure creation by Global car manufacturers
  • Leading global players like ISUZU Motors, FORD Motor, Tata Motors, and Suzuki Motor have invested heavily in the manufacturing sector resulting in the setup of new assembly lines, manufacturing and greenfield units thus boosting the manufacturing ecosystem in India.
  • Honda inaugurated its second assembly line at its scooter manufacturing plant in Gujarat in June 2016.
  • ISUZU Motors, a Japanese Automobile manufacturer, inaugurated its greenfield manufacturing unit with an investment of US $ 445 mn in SriCity, Andhra Pradesh in April 2016.
  • Tata Motors and Fiat Ltd have set up joint assembly line to manufacture SUV cars at Ranjangaon unit (Pune), with an investment of US $ 280 mn.
  • Magneti Marelli, Fiat’s component manufacturing arm, opened a new manufacturing facility for the production of robotized gearboxes, in October 2015.
  • Pune based Force Motors inaugurated its Rs 100 crore greenfield plant in June 2016 for supplying engines and axles to Mercedes- Benz India.
  • Suzuki initiated a greenfield project in car and power train manufacturing in June 2015 near Ahmedabad, Gujarat.
  • Mercedes Benz inaugurated  its second manufacturing facility in Chakan in July 2015.
Growth trends in the Indian Automobile Industry in the last two years:

Rise in Production
  • Production increased by 2.6% in FY 2015-16 with the industry producing a total 23,960,940 vehicles including passenger vehicles, commercial vehicles, three wheelers, two wheelers and quadricycle in FY 2015-16 as against 23,358,047 vehicles produced in previous fiscal year.

Rise in Domestic Sales
  • Sales of Passenger vehicles increased by 7.24% in FY 2015-16 over the same period previous year. Within the Passenger Vehicles, Passenger Cars, Utility Vehicles and Vans grew by 7.87%, 6.25% and 3.58% respectively in FY 2015-16 over the same period previous year.
  • Overall Commercial Vehicles segment registered a growth of 11.51% in FY 2015-16 as compared to the same period previous year. Medium & Heavy Commercial Vehicles (M&HCVs) registered a growth at 29.91% and Light Commercial Vehicles grew marginally by 0.30% in FY 2015-16 over the same period previous year.
  • Three Wheelers sales grew by 1.03% in FY 2015-16 over the same period previous year. Within 3 wheeler segment, passenger Carrier sales grew by 2.11%.
  • Two Wheelers sales registered a growth at 3.01% in FY 2015-16. Within the Two Wheelers segment, Scooters grew by 11.79%.
  • Industry saw rapid rise in total production of electric and hybrid vehicle from 17,107 (FY 2014-15) to 71,909 (FY 2015-16) and rise in total sales from 16,513 (FY 2014-15) to 65,224 (FY 2015-16).
Rise in exports
  • In  FY  2015-16,  Automobile  exports  grew by 1.91% (exports worth US$8.8bn). The major growth drivers were Passenger Vehicles, Commercial Vehicles and Two Wheelers which registered a growth of 5.24%, 16.97% and 0.97% respectively in FY  2015-16 over the same period previous year.
  • Two wheelers accounted for the largest share of exports at 69.4% in FY 2015-16. Passenger vehicles comprised a sizeable 16.7% of overall exports. Three wheeler vehicles registered around 11.1% share in exports in FY 2015-16.

Growth trends in the Indian Auto-component Industry in the last two years:
  • The Auto-component Industry growing (turnover)* at a CAGR of 6% in the last 6 years (2010-2016), contributed 2.3% to India’s GDP and provided direct employment to 1.50 mn people (in FY 2015-16).
  • The industry registered a 8.8% increase in turnover from US$38.5bn in FY 2014-15 to US$39bn in FY 2015-16.
  • In FY 2015-16, the vehicles aftermarket grew by 12% to US $ 6.8b n from US $ 6.5 bn in FY 2014-15.
Rise in Exports
Exports in the auto-components sector is growing at a CAGR of 18% in the last 6 years. Exports in the last 2 years (2014-16) grew from US $ 19.9 bn to US $ 22 bn..
The auto-component industry contributed 4% to India’s exports in FY 2015-16, with an earning of US$10.81bn. The top export destinations are USA, Germany, Turkey, UK and Italy.

Fiscal Incentives
  • To promote exports of manufactured green technology products, the export obligation of 16 specified products has been reduced under the Export Promotion Council Goods (EPCG) scheme (Foreign Trade Policy 2015-20).
  • Excise duty on chassis for Ambulance reduced from 24% to 12.5%.
  • Basic Customs Duty on Commercial Vehicles increased from 10% to 20%.
Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME)
  • To address the global demand for innovative and fuel economy vehicles, the FAME scheme to incentivize, develop, manufacture and promote the hybrid/electric vehicles market development was launched on April 1, 2015 targeting a market penetration of 6-7mn vehicles per year by 2020.
  • The scheme envisages creation of an ecosystem of innovation by promoting domestic technology development and manufacturing of full range of cleaner electric vehicle technologies that include mild hybrid, full hybrid vehicles (HEVs), Plug in Hybrids (PHEVs) and Pure Electric Vehicles (PEVs) (collectively termed as XEVs).
  • FAME aims to achieve a cumulative fuel saving of about 95,000mn liters equivalent resulting  in reduction of pollution and greenhouse gas emission of 2mn tonnes and achieve 60-70 lakh sales of hybrid and electric vehicles.
  • The Phase – 1 of the scheme is being implemented over a period of 2 year i.e. FY 2015-16 and FY 2016-17 with a budget outlay  of Rs 795 crore. Initial seed money of RS 75 crore was allotted in the FY 2015-16 and Rs 122.90 crore has been allotted in FY 2016-17.
Incentives offered
  • On electric and hybrid vehicles of up to US $ 430 for motorcycles and US $ 2050 for cars.
  • Hybrid Vehicles now attract excise duty at 12.5% and electric vehicles attract excise duty at 6%, against the excise duty of 30%, 27%, 24% and 12.5% applicable on vehicles with conventional fuel.
Other achievements

UNIDO-ACMA-DHI Cluster  Development project (United Nations Industrial Development Organization - Indian Automotive Components Manufacturers Association -Department of Heavy Industry): In FY 2015-16, US $ 337,749 was released to UNIDO to provide support to SMEs in the automotive component industry.

Skill Development/Job Creation

Automotive Skill Development Council (ASDC) has trained a total of 1,21,662  people in FY 2014-15 and 1,66,580 in FY 2015-16.

Innovation and R&D

National Automotive Testing and R&D Infrastructure Project (NATRiP)
With an aim to create global competencies in the automotive sector by promoting innovation, R&D and opening of global test centres, the budget outlay of the NATRiP centre was further increased to Rs 3727 crore in July 2016.The time line for completion of NATRiP centres is December 31, 2017 except for the Indore Centre which is June 2019.
 
Out of the six NATRiP centres, all the facilities  at three centres viz, Automotive Research Association of India(ARAI) at Pune, Vehicle Research & Development Establishment (VRDE) at Ahmednagar and NIAIMT at Silchar have been completed. Some  of the facilities in the remaining three centres namely International Center for Automotive Technology (ICAT) at Manesar, Global Automotive Research Center (GARC) at Chennai and National Automotive Test Tracks (NATRAX) at Indore have been completed and the works for the other facilities in these centres are at advanced stage of completion.

The NATRiP centres successfully developed are: 
  • Mileage Accumulation Chasis Dynamometer (MACD) for 2W, 3W, 4W at ARAI, Pune.
  • Engine Test cell (ETC) for  Heavy Duty and Light Duty Engines at ARAI, Pune and ICAT, Manesar.
  • Sealed Housing Evaporation Determination (SHED) facility for 2W, 3W and 4W at ARAI, Pune.
  • Vehicle Test Cell (VTC) for 4W at ARAI, Pune.
 
Major foreign investments in the sector during April 2014 to March 2016
 
Foreign Collaborator
 
Country
 
Indian Company
FDI (USD
Millions)
Ford International Services and Ford Motors  
U.S.A
 
Ford India Limited
 
979.50
SAIC General Motors
Investment Limited
China, Hongkong, USA  
General Motors India Pvt. Ltd
 
973.93
 
Suzuki Motor Corporation
 
Japan
 
Suzuki Motor Gujarat Private Limited
 
477.61
 
Daimler AG
 
Germany
Daimler India Commercial Vehicles Pvt. Ltd.  
389.04
 
Nissan Motor Co. Ltd
 
Japan
Renault Nissan Automotive India Pvt. Ltd.  
169.20
Isuzu Motors Asia Limited Singapore, Japan  
Isuzu Motors India Pvt. Ltd
 
116.67
 
FCC Co. Ltd.
 
Japan
 
FCC Clutch India Private Limited
 
95.19
 
Continental Automotive GMBH
 
Germany, Netherlands
 
Continental Automotive Components, Continental Automotive Brake Systems
 
 
72.53
 
Renault group Bv
 
Netherlands
Renault Nissan Automotive India Pvt. Ltd  
72.51
 
Caparo India Limited
United Kingdom Caparo Engineering India Private Limited  
56.77
Blue Elephant Finance Limited  
Mauritius
Caparo Engineering India Private Limited  
53.90
 
Showa Corporation
 
Japan
 
Showa India Private Limited
 
52.85
Lear Automotive Services (Ned) & Mauritius  
Netherlands
 
Lear Automotive India Private Limited
 
49.64
 
 
Foreign Collaborator
 
Country
 
Indian Company
FDI (USD
Millions)
Fiat Group Automobiles S.P.A  
Italy
 
Fiat India Automobiles Limited
 
48.49
Singapore Airlines Limited  
Singapore
 
Tata SIA Airline Limited
 
46.01
 
MAN Truck & Bus
 
Germany
 
Man Trucks India Private Limited (Man Force Truck)
 
42.70
 
 
Distribution & Logistics Infrastructure
 
 
Mauritius
Vikram Logistics & Maritime Services Private, Freightsatr Private Limited, Bhim Singh Yadav Property Private Limited, Deshpal Realtors Private Limited  
 
35.50
 
Yorozu Corporation
 
Japan
Yorozu JBM Automotive Tamilnadu
Private Limited
 
33.09
 
NHK Spring Co. Limited
 
Japan
NHK Automotive Components India Private Limited  
31.31
Bussan Automotive Singapore Pte Limited  
Singapore
 
India Yamaha Motors Private Limited
 
29.72
 
Toyoda Iron Works Co Limited
 
 
Japan
 
Toyotetsu India Auto Parts Private Limited, Stanzen Toyotetsu India Private Limited
 
 
27.77
 
AINOS Holdings Limited
 
Mauritius
 
Bill Forge Private. Limited.
 
24.88
Saif Partners India V Limited  
Mauritius
 
Trucksfirst Services Private Limited
 
24.21
Normandy Holdings Limited  
Mauritius
 
Mahindra Logistics Limited
 
22.79
 
Valeo Bayen
 
France
Valeo Lighting Systems India Private Lim  
22.30

 

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