Driving Forces of India’s Automotive and Auto Areas Sector

The automotive sector is just one of India’s greatest and swiftest increasing producing sectors. With a turnover of US$13 B, the automobile sector employs about .forty five million people instantly and 10 million people indirectly, together with immediately after-revenue and servicing networks. This rated India as the 11th greatest passenger car producer in the globe. In the class of bikes and scooters, India is rated 1st and 2nd respectively. With India progressively liberalizing its sector area, numerous new joint ventures advanced, resulting in near to two dozen world automobile brands location up store in India

The automobile ingredient phase is similarly strong, giving the full array of parts essential by the domestic automobile sector and at the moment employs about 250,000 people. While modest by world requirements, this phase is increasing fast as a result of its low costs and climbing good quality. Sales turnover of parts is approximated to have arrived at US$8.7 B in 2004/05, 29% better than the earlier yr. Noticeably, automobile ingredient brands supply to two sorts of purchasers – unique products brands (OEM) and the substitution sector. Around 300 modest and medium organizations instantly company the OEMs assembling motor vehicles in India. Downstream, near to five,000 other micro companies are functioning for these Tier one suppliers, as perfectly as for the substitution sector

The sector can be segmented into two. One particular is the automobile phase. The other is the automobile parts phase. The essential producing parts for these two segments are perfectly unfold throughout the region.

The expansion of India’s automotive sector is pushed by the essential forces underneath:


Automotive linked imports are mostly in automobile parts, accounting for a lion’s share of 85%. These imports will feed the producing plants, manufacturing motor vehicles for domestic sector as perfectly as export sector.

As the demand from customers from the domestic sector boosts with climbing affluence, generation will maximize in tandem, that’s why necessitating much more imports of parts, specifically these of better precision which nonetheless cannot be performed in India. International gamers in India nonetheless have to have to import fairly substantial sum of automobile parts for their automobile assembly as good quality and technological requirements of automobile parts sourced from within India may well not fulfill their substantial requirements. The envisioned Maximize in exports of India-produced motor vehicles will also contribute to import expansion of automobile parts.


Automotive linked exports expanded fast in new a long time. Automobile exports grew at a compound once-a-year expansion level of 46% among 2001 and 2006. Export share of generation amplified from three% in 2001 to 8% in 2006. The expansion is boosted by these several variables these types of as India’s price tag competitiveness in terms of labor and raw material proven producing base economies of scale due to domestic sector likely to harness world model impression of the mother or father corporation, as perfectly as the world hub plan for modest vehicles like Hyundai, Suzuki, etcetera

Most automotive exports go to developing nations around the world in Asia, in which low-cost vehicles can find a sector. Egypt, Kenya and Nigeria are crucial destinations for India’s automotive exports. A lot more not long ago, as the good quality and engineering of India-produced automobiles have improved and achieved stringent prerequisite of the global sector, some vehicles have observed purchasers even in Western Europe.

Equally for automobile parts, exports have been increasing at a compound once-a-year expansion level of twenty five% over 2000-2005. Share of exports in whole generation amplified to eighteen% in 2005 from 10% in 1997. International carmakers in wealthy nations around the world are progressively turning to India for parts, as low costs, relatively great engineering base and access to affordable raw material make India very competitive in its automobile parts exports.

The major export markets are the United states, Germany, Japan, Sweden, the United kingdom and Italy. Asia, Africa and the Center East alongside one another just take up forty four% of India’s automobile element exports.

Regulatory/Govt initiatives

Govt initiatives and regulatory frameworks are also essential driving forces to the automotive sector in India. At this time, one hundred% overseas direct investment in the automotive sector, with no mandatory minimum amount stage of investment is authorized. No nearby tie up is needed due to the fact the sector has previously been entirely de-accredited and deregulated. This supplies a solid impetus for world automobile gamers to established up store in India. Further, excise duty and custom made taxes have also been saved competitive in order to make participation in the automotive sector conducive

On best of these, an Automotive Mission Prepare 2006-2016 is also remaining drafted to produce the domestic sector, as perfectly as the export sector. It aims to produce India into a premier automotive hub. Transferring ahead, India targets to become just one of the best five automotive economies by 2025

Intercontinental Agreements

Trade/economic co-procedure agreements among India and the location or other global markets will improve India’s exports of both of those automobile and parts to the location/global markets. Going ahead, the likely agreements are: TVS Group’s prepare to invest in Indonesia to manufacture two-wheeler FTA among India and ASEAN (negotiation in development) would also offer prospects for direct trade and investment among India and ASEAN nations around the world FTA with nations around the world like China, Korea, Japan, Chile, etcetera