The Indian automobile industry - demand, exports and growth opportunities

Landing at Rank 77 in the Ease of Doing Business report released by the World Bank, India has observed certain remarkable improvements in terms of economic growth and creating opportunities for industry giants in the country with the help of business development consultant in terms of setting up business in India.

The country’s automotive sector became the world’s 4th largest in the world with its sales increasing 9.5 percent year-on-year to 4.02 million units in the year 2017. Last year, India became the world’s 7th largest manufacturer of commercial vehicles. The country’s demand for the automobile sector is broadly based across multiple sectors; however, major demand is from the rural part of the country. Over the years, Indian consulting companies state that India has emerged as a prime destination for automotive manufacturer for both small and heavy vehicles.

The continuously growing population and the expanding middle-class section of the society are expected to remain the key drivers of the demand for automotive components in the country. The industry accounts for 2.3 percent of India’s Gross Domestic Product (GDP) and employs as many as 1.5 million people directly and indirectly each. The presence of a stable government framework, increasing purchasing power, larger domestic market, and continuous development in the infrastructure have made India a favorable destination for investment, creating opportunities for major companies for establishing a business in India.

As far as the Indian automotive sector is concerned, the country is the world’s sixth largest auto producer by volume, owning less than 1 percent of the global export markets. As per July 2018, the exports in the Passenger Vehicle (PV) segment comprised of cars, utility vehicles, and vans have grown around 41 percent in the first quarter of the ongoing fiscal in comparison with the previous one. The growth in shipment of automobile products to foreign shores from India has maintained its pace with hike in the domestic sales in most of the segments in the first quarter of the financial year 2018-19. The overall demand for automobiles grew by 18 percent in the domestic market whereas the demand for exports went up by 26 percent. According to the latest society of Indian Automobile Manufacturers (SIAM) data, the segment witnessed total exports of 167, 161 units in the quarter as against 118,420 units in April-June period of FY 2017-18.

As of May 2018, India’s annual production stood at 29.08 million vehicles, inclusive of passenger vehicles, commercial vehicles, three-wheelers, two-wheelers and quadricycles in FY18 as against 25.33 million in FY17, witnessing a growth of 14.8% as compared to a growth of 5.5% during the same period last year. Being a prominent auto exporter, India’s auto exports stood at about 14% of the automobiles produced annually. Declined by about 4.5% in FY17, the exports witnessed a sharp growth of over 16% in FY18. The gross turnover of the Automobile manufacturers in India for the year 2016-17 stood at US$ 67,724 million.

Going forward in FY19, the Indian auto industry is expected to continue witnessing a healthy growth with regard to the disruptions caused by various policy implementations such as demonetization, ban on BS-III vehicles, GST, rate revisions have been moderated. Moreover, the demand is expected to improve the back of various initiatives taken by the government in the Union Budget 2019 for the agriculture and infrastructure sectors. Additionally, as observed by the consulting companies, auto exports from India are expected to show strong growth as many companies like Volkswagen, Ford Motors, General Motor are focusing on exports and expansions in newer markets such as South America, North America, and Asia, resulting in an increase in the growth. Export demand from the African and Latin countries is expected to pick up on the back of stabilization of exchange rates and commodity prices in the country.

Bostel Consulting as Market Access Partner Europe for Tecnova, the India management consultant helps global organizations enter and establish/set-up their business in India.

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