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Indian Automotive Sector Shifting Gears; Moving Towards E-Automobiles

This sector was first opened up for FDI in 1991 during the liberalisation of the Indian economy and is now one of the critical contributors for the country’s ‘Make in India’ initiative

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The Indian automotive industry, pegged at approximately $100 billion, has witnessed a massive transformation over the last 70 years and is on a growth trajectory with impressive spurt in sales, production, and exports since the turn of the millennium. This sector was first opened up for FDI in 1991 during the liberalisation of the Indian economy and is now one of the critical contributors for the country’s ‘Make in India’ initiative.

The seeds of auto industry revolution were however, sown in the mid 80s when the government of India joined hands with Suzuki to build a people’s car (aka Maruti 800).  During that decade, Hero Group had inked a joint venture (now separated) with Honda Motor Company to build commuter motorcycles for the masses.

Currently comprising more than 35 OEMs or original equipment manufacturers (including new entrants), this industry has an average production of around 25 million vehicles per annum and employs nearly 30 million people (directly and indirectly).  The domestic automobile sector is one of the largest in the world and accounts for more than 7 per cent of the country’s overall GDP,  27 per cent of the industrial GDP, 4.3 per cent of overall exports (second only to textiles and handicrafts) and 13 per cent of excise revenues.

Until the 1930s, the cars were imported by a select few and in limited numbers. The industry finally took birth in the 1940s when a handful of companies such as Hindustan Motors, Premier, Mahindra, etc., started assembling foreign-made automobiles. Following Independence in 1947, the government and the private sectors collaborated to create an automotive component manufacturing industry to support the automobile industry.

As India began to liberalise its automobile market in 1991, a number of multinational giants like Hyundai, GM, Ford, Fiat, Daewoo, Peugeot, etc., either established wholly-owned subsidiaries or inked joint ventures with local players. As a result, there were multiple options available to the consumers from various brands.

The era of 2000-15 was the most eventful one as FDI worth $15.065 billion was injected into the market. The period also saw a number of new entrants such as Nissan, VW, Fiat (re-entry), Honda (two- and four-wheelers), Daimler (CVs), BMW, Skoda, Audi among others.

India has now attained the rare distinction of becoming the largest tractor manufacturer, largest two-wheeler market (in terms of volumes), second largest bus manufacturer, fifth largest heavy truck manufacturer, sixth largest car maker and 8th largest commercial vehicle manufacturer. The Indian automobile industry is expected contribute over 12 per cent to the country’s gross domestic product (GDP) and generate around 6.5 crore additional jobs over the next decade. The Automobile Mission Plan 2016–26 envisages creating India as one of the top 3 automobile manufacturing centres in the world with gross revenue of $300 billion by 2026.

Industry pundits are speculating that India could be marching towards an all-electric vehicle parc by 2030 and in the  process, the government will frame policies to scrap fossil fuel-driven vehicles and replace them with green  vehicles. According to a report by NITI Aayog, India can reduce energy demand by 64 per cent and carbon emissions by 37 per cent with the help of connected, shared and electric passenger mobility across the country.

Baby steps towards e-mobility have already been taken as the Vikram Sarabhai Space Center (VSCC) under the Indian Space Research Organisation (ISRO) has developed a ground breaking technology to manufacture high-powered batteries for e-automobiles of all segments. Media reports have also claimed that the government has urged ISRO to license this technology to OEMs, battery makers, PSUs, and other private players for mass production of lithium-ion batteries for automobiles.


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