The Indian automobile sector includes both automobiles and automotive components. It is a key engine driver of economic growth with a significant contribution to Gross Domestic Product (GDP), exports, and employment opportunities.
The rise in middle-class income levels and overall percentage of the youth population has led to consistent industry growth. India is a major auto exporter, with excellent export growth prospects for investors eyeing the opportunity.
Reasons for Investing
- India is the 5th largest auto market in the world and the 7th largest manufacturer of commercial vehicles.
- Domestic automobile production and domestic sales increased at a CAGR of 2.36% and 1.26%, respectively.
- The automobile export increased at a CAGR of 6.94%, with two-wheelers making up 73.9% of overall exports, followed by passenger vehicles, three-wheelers, commercial vehicles, etc.
- In the past year, premium motorbike sales have experienced a seven-fold growth.
- As per India Energy Storage Alliance's report, the Indian EV market in India is projected to grow at a CAGR of 36% in the next five years.
- The CAGR of 30% is projected for the EV battery market owing to the increased adoption of EV vehicles.
- The Indian government has allowed for 100% automatic route FDI in the automobile industry.
- Automobile giants like Lambhorgini, Tesla, Mercedes Benz, and Hyundai Motors have initiated investments in the competitive Indian market.
Industry Growth Factors
- Increased emphasis on shared mobility concept
- Government initiatives like FAME (Faster Adoption and Manufacturing of (Hybrid) and Electric Vehicles) spotlight electric vehicles to combat environmental pollution
- Incubation centers for EV startups and initiatives to set up battery charging points
- Availability of low-cost steel manufacturing and cheap skilled and unskilled labor
- A seven-fold jump in domestic premium motorbike sales
- Voluntary vehicle scrappage plan by the government to eliminate old and unfit vehicles on the road
- Increased penetration of rural markets ad growth in fully automated driving systems
- National Automotive Testing and R&D Infrastructure Project (NATRiP) initiated by the Indian government to promote India as an R&D hub in the auto market
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