The automotive industry is a critical component of economic growth. The Indian auto industry is one of the largest in the world with an annual production of 23.37 million vehicles in FY 2014-15. The automobile industry accounts for 22 per cent of the country’s manufacturing gross domestic product (GDP). The industry directly employs more than 10 million people engaged in designing, engineering, manufacturing, and supplying parts and components to assembly, sale and service new motor vehicles. In addition, the industry is a huge consumer of goods and services from many other sectors, including raw materials, Construction, machinery, legal, financial and advertising.

India, in global auto sector, has made its presence felt in the recent years with its potential. India offers scope for the manufacture of low cost vehicles with its highly skilled but inexpensive manufacturing base, labour intensive components in the developing economy.

Various Segments of Automobile Industry


  • Projected CAGR for auto OEM sector is 7%, while that of Auto component industry is 18%.
  • 100% FDI under automatic route, allowing free imports of automotive components and de-licensing in the automotive sector has helped in developing the sector.
  • By 2020, India’s share in the global passenger vehicle market to double to 8 per cent from 4 per cent over 2010–11.
  • Subdued oil prices, decrease in interest rate and Modi government initiative like ‘Make in India’, 100 smart cities are likely to give a boost to the automobile sector.
  • Over the years, due to many factors like geographical proximity to key automotive markets, a large pool of skilled and semi-skilled workforce, large production of steel have made India a preferred destination for Automobile Industry in the globe.


  • The automobile sector is hugely capital intensive. Large capital is to be invested in developing a new product with long gestation period. Brand promotion expenditure, large distribution network, and greater product innovation are the add-ons.
  • The competitive rivalry has increased post liberalisation to a great extent. Almost all the international big brands have entered India. Because of availability of various options, competition being the major, Auto sector works on very thin margins.
  • Over the years Indian auto industry has moved away from urban focus to rural bias,. But thanks to continued rural weakness, high inflation, unseasonal rains & poor monsoon forecasts automobile sector is under pressure.
  • The auto ancillary sector is facing tough competition from the Chinese market. China is much cheaper than India in terms of raw material hence many OEM prefers raw material from China.


Where does India Stand

  • Largest Tractor Manufacturer
  • 2nd Largest two wheeler manufacturing hub
  • 2nd largest Bus manufacturer
  • 6th largest car manufacturer
  • 7thlargest commercial vehicle manufacturer
  • 4th largest Steel producing country

Vehicles per capita

In India, motor vehicle penetration is very low as compared to other developing countries. At present, there is roughly around 47 vehicles per 1000 people.

Following is the list of few developing countries by the number of road vehicles per 1000 inhabitants. The present list excludes motorcycles and other two-wheelers.

Automotive clusters in India

Automotive industry has a significant presence on all the four sides of India. Delhi- Gurgaon- Faridabad in the north, Mumbai-Pune- Aurangabad- Nasik in the west, Chennai- Bengaluru- Hosur in the south and Jamshedpur- Kolkata in the east are the four major auto clusters in India. One more auto cluster is developing in the west region Sanand, Gujarat. This auto cluster will pave the way for making western region the most competitive destination for automobile industry in India. Suzuki, Ford and Tata Motors are some automobile players which are starting their plant in Sanand.

Area wise export

Design and Research Centres of leading global companies in India

Favorable government policies and availability of adequate resources leading India to emerge as R&D house for world leading auto companies. To give strong support to R&D, government has established National Automotive Testing and R&D Infrastructure Project (NATRiP) centers. AMD, Boeing, Bosch, Ford, GM, Honda, Honeywell, Hyundai, Mercedes Benz, Suzuki, Valeo, Nissan have their research centers in India.

Electric Vehicle

Increasing environmental awareness is leading auto companies to think on manufacturing less polluting vehicle. Next generation will be of Electric vehicle. Government has established The national mission for electric mobility 2020”. The objective of this body is to encourage reliable, affordable and efficient xEVs (hybrid and electric vehicles) that meet consumer performance and price expectations through government-industry collaboration, for the promotion and development of indigenous manufacturing capabilities, required infrastructure, consumer awareness and technology – thereby helping India emerge as a leader in the two-wheeler and four-wheeler xEV market in the world by 2020, with total xEV sales of 6-7 Million units thus enabling the Indian automotive industry to achieve global xEV manufacturing leadership and contributing towards national fuel security.

The uptake of electric vehicles will depend in large part on the adequate deployment of Electric Vehicle Supply Equipment (EVSE) needed to recharge electric vehicles.

Gaining Momentum in Luxury car

India has the world’s 12th-largest HNI population, with a growth of 20.8 per cent (highest among the top 12 countries). With increasing wealth and spending power and desire for luxurious life more consumers aspire to own luxury cars. Affluent class of the country is driving the demand of the luxury cars. The Indian luxury car market expanded at a CAGR of 30 per cent. Indian luxury car market is dominated by players like Mercedes Benz, BMW, Audi, Jaguar and Volvo,

Easy financing

Today customers have greater availability of credit as a financing option. Many of the car makers have started providing customised financing to customers through various credit channels.  Corporate houses too are buying cars in large number because of operating lease option.

Crude oil prices

After touching the prices below USD 50 per barrel from USD 110 per barrel, the prices have been stabilised between USD 55 – 60 per barrel. Decrease in oil prices is driving demand high for automobiles.

Infrastructure Development

New government is very much keen on infrastructure development. Overall condition of roads is improving,  Number of expressways & National highways are proposed by the ministry.  A major thrust on infrastructure spending and road development augurs well for automobile industry. Start of infrastructure development activity and opening up of the mining sector has help speed up the growth of M&HCVs.


To match production with demand, many automakers have started to invest heavily in various segments in the industry in the last few months. The industry has attracted foreign direct investment (FDI) worth US$ 12,232.06 million during the period April 2000 to February 2015, according to the data released by Department of Industrial Policy and Promotion (DIPP).

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