Future of automobile industry in India

by ICRI India Reviews Institute of Clinical Research India

India is expected to emerge as the world’s third-largest passenger-vehicle market by 2021. It took India around seven years to increase annual production to four million vehicles from three million. However, the next milestone—five million is expected in less than five years. Hitting that mark will depend on today’s rapid economic development continues, with a projected annual GDP growth rate of 7 percent through 2020, ongoing urbanization, a burgeoning consuming class, and supportive regulations and policies. The market for passenger vehicles in the country will evolve in the context of several larger trends, some specific to India, and some relevant globally. The Indian automotive industry has been growing for the third year in succession at over 25%. The number of persons per car is 200, which is very large compared to other emerging markets like Korea and Brazil which have about 12 persons per car. There is, therefore, a very substantial untapped market. Since June 1993 when the Government changed its policy on automobiles, 13Multinational Companies (MNCs) have announced plans to invest in India. Compared to the three major models available in the Indian market until recently, customers can now choose from a wide variety of products.

Currently, the automotive sector contributes more than 7 percent to India’s GDP. The Automotive Mission Plan 2016–26 sets an aspiration to increase the contribution to 12 percent. Many economic trends could help in meeting this target. Rapid urbanization means the country will have over 500 million people living in cities by 2030, 1.5 times the current US population. Rising incomes will also play a role, as roughly 60 million households could enter the consuming class (defined as households with incomes higher than $8,000 per annum) by 2025. At the same time, more people will join the workforce. Participation could reach 67 percent in 2020, as more women and youth enter the job market, raising the demand for mobility.

The macroeconomic and demographic trends would in the future see a trend in the increase in the number of the passenger-vehicle market. Mini cars and hatchback cars have been the mainstay for the Indian automobile industry for an extended period.

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