Factors That’ll Drive the Indian Auto Industry


Factors That’ll Drive the Indian Auto Industry

Indian auto market was an island in the pre-liberalization era, thanks to restrictive regulatory norms, and high import duties and taxes. Liberalization changed it all in 1992, facilitating the entry of Foreign Direct Investment and the best vehicles, brands and technologies into the Indian auto space. With the auto industry coming of age, India capped off 2018 with production of over 30 million vehicles and an impressive 6.26 percent growth rate. Presently, it’s one among the top 7 auto manufacturers and the 4th largest auto market in the world.

While the signs are encouraging, speculations are ripe on how a few local and global trends will shape up in coming times. Let’s discuss the some key factors that shape these trends.

Policy initiatives:
The Government of India is keen to attract more foreign investments into the auto sector, raise the bar in the auto technology India, and cut down carbon footprint significantly.

  • Currently, the government permits FDI with up to 100 percent equity to keep the Indian auto industry poised for a consistent growth. The global auto incumbents like Hyundai, Honda, Mercedes Benz and more are furthering their investments in India.

  • Measures are being taken to help India evolve as a global manufacturing destination and a R&D hub. In fact, about 388.5 million dollars will be invested on setting up R&D centers pan India to invent, develop and mainstream cutting edge auto technologies.

  • The government acknowledges electric as the latest automobile technology, and foresees an all-electric future by 2030. To this end, Electric Vehicles will be introduced into the public transport systems across 11 cities. Upgrading grid capacities, building EV friendly infrastructure and setting up incubation centers are being prioritized. 

  • About 1.39 billion dollars have been allotted to the Faster Adoption and Manufacturing of Electric Vehicles in India (FAME) scheme for the FY20-22 to promote adoption of EVs.

  • The Automotive Mission Plan 2026 is being implemented to increase the industry revenues by three folds and exports by seven folds, and create 6 Crore jobs.

  • Tackling emissions is also being prioritized with the introduction of BS-6 emissions in 2020. Plus, the CAFÉ norms are implemented, mandating manufacturers to up their fuel efficiency by 30 percent after 2022.

Demographic factor:
Demographic trends determine growth rates far into the future. India’s urban population is expected to touch the 50 Crore mark by 2030, about 6 Crore households will be a part of the consuming class by 2025, and the country’s workforce will grow exponentially and so will the purchasing power parity. All these demographic indicators suggest the rapid rise in demand for mobility across two-wheeler and four-wheeler segments. With a present 2.70 percent growth rate, the passenger-vehicle market is expected to be the biggest gainer.

The mini cars and hatchbacks have been the biggest crowd puller in the Indian auto market, and are expected to keep their dominance intact in coming times. Growth for SUVs, sedans, and luxury cars is also on the cards, thanks to the increasing purchasing power. Plus, they are the ideal candidates for implementation of the latest technology in automobile 2019.


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