One of the most necessary elements of our everyday life is the service the vehicles provide. Therefore, transportation is a facility that is a vital support for our daily life. The automobile industry in India ensures that factor and continues to provide us with multiple kinds of transportations. Not only do the various automobile companies of India give us all sorts of vehicles, but there is also a specific escalation and growth about it. As there is a huge need for transportation, there is a high demand for it. And the Indian automobile industry companies keep providing more products to fulfill that demand.
Many factors come into the discussion when talking about the growth of the automobile industry of India. However, there are certain elements and scenarios one must consider to understand the escalation of the automobile industry. These include the demand for certain types of vehicles, production and supply, and the overall market impact. Therefore, we are here to discuss and give you an overview of the developing factors of the Indian automobile industry.
Introduction to the automobile industry of India
India is one of the most populated countries in the world. Perhaps, that is why the massive demand for transportation and thus the high amount of production from the automobile industry. As of 2020, India has the fifth largest automobile market sector in the world. The automobile industry of India sold over 3.49 million units of vehicles in both the vehicle category of passenger and commercial vehicle. That is quite a considerable improvement if you consider that in 2019 it was the seventh-largest automobile manufacturing market in commercial vehicles. That is undoubtedly a significant achievement to rank up in just a year.
There is a demand for both four-wheelers and two-wheelers, but comparatively, there is a higher demand for two-wheelers than four-wheelers. That is why two-wheeler producing sectors dominate four-wheelers in the automobile market. This demand is the result of the rising and growing population of young age and middle-class people. As most middle-class people don’t have the money to maintain a four-wheeler, they buy two-wheelers. Also, the space required to keep a four-wheeler is more significant than a two-wheeler. And of course, young people are attracted and prefer two-wheelers.
The market demand for the automobile in India is ever-growing. Not only have the Indian automobile companies produced vehicles for the country but also for export purposes. This factor is a sign that it is only a start to a much bigger demand and growth in the future.
The production and distribution of vehicles around India
As mentioned earlier, India is one of the most densely populated countries in the world. So naturally, this results in a higher demand for automobiles and transportation. And if there is a higher demand for the product, there should be more production and manufacturing. In India, Chennai, Mumbai, Kolkata, Jamshedpur, and Jabalpur are the main centers of the automobile production industry. All kinds of vehicles, including cars, buses, trucks, bikes, two-wheelers, and four-wheelers, are produced in these centers.
There is a good amount of supply for both passenger and commercial vehicles. Passenger vehicles are manufactured by companies like Maruti, which collaborated with a Japanese company, becoming Maruti Suzuki. Other companies include Premier automobiles limited, Hindustan motors, Sunrise industries, and many more. There has also been the collaboration of different foreign companies such as Ford with Mahindra and others.
Commercial vehicles are usually used for two different purposes, passenger and goods purposes. State-owned transport undertakings generally produce the manufacturing of the passenger sector. On the other hand, the goods vehicle category is mainly owned and manufactured in the private sector.
The production volume of the automobile industry of India seems to increase with time. As of 2015 – 2016, approximately, there have been over 3,000,000 units of passenger vehicles and over 700,000 units of commercial vehicles. Other scales include the production of more than 18,000,000 two-wheelers, over 900,000 three-wheelers. These productions sum to a total number of more than 24,000,000 units. Fast forward to 2019 – 2020; there has been a specific increase in production in two-wheelers with over 21,000,000. This increase in the number of two-wheelers with other types of vehicles as well makes the difference. Thus, the total number of vehicle production during 2019 – 2020 reaches more than 26,000,000 units.
Demand for the automobile industry in India
The considerable number of products that are mentioned is not an overwhelming amount in the automobile market. However, the automobile sector has a vast demand and only seems to escalate as time goes. The vehicle production of these companies is due to the pressurized demand from the people. Like middle class and young people are fond of two-wheelers and are interested in buying one. Others also tend to possess a personal vehicle.
And with the increase of population, there is a sure growth in demand as well. The automobile industry not only produces for people in India but also exports it. The increase in market share and production volume speaks for how greater the demand is for the automobile.
Understanding the market size of the automobile industry
The market share of the automobile industry in India depends on the type of vehicle and their respective demand in a particular area. For example, the two-wheelers of India dominate the domestic vehicle industry more than four-wheelers. Generally, two-wheeler vehicles are accounted for approximately 80.8 % of the market share, while 12.9 % market share for four-wheelers. The accounting for the combined sale of those vehicles exceeds over 22 million units. Domestic vehicle manufacturing increases approximately 2.36 % on a compound annual growth rate. This increase in production occurred between FY2016 – FY2020, with more than 26 million vehicles being manufactured over the entire automobile industry.
The usage of such a massive number of vehicle productions is not limited to this country only, as vehicles are also made for export purposes. In the FY2020, the exporting of automobiles reached more than 4 million vehicles. This is a massive growth at a 6.94 % CAGR during the period of FY2016 – FY2020. Passenger vehicles made up to 14.2 % of vehicle exports, while two-wheelers significantly impacted a much higher 73.9 % of export. Other vehicles, including commercial vehicles, made about 1.3 %, and three-wheelers made up to 10.5 % export.
The growth rate of the automobile industry of India
There has always been substantial growth in the Indian automobile industry. As for the population of a country like India, it makes an impact on the automobile industry. This factor generates a significant demand in the sector, thus, making them manufacture and produce more vehicles. So the growth rate of the Indian automobile industry is estimated to be 4.9 % from FY2015 – FY2020. The production volume of cars has only increased as back in FY2011, the two-wheeler production was 13.35 million, and passenger vehicles were 2.98 million. But in FY2019, it was 24.5 million for two-wheelers and 4.03 million for passenger vehicles. This is undoubtedly an exponential growth that will lead to further development of the industry.
According to Indian automobile industry analysis 2021, the growth is slightly depleted or decreased. Compared to the 2019 or 2020 total number of productions of over 26,000,000 units, in 2021, it had gone down to 22,000,000. This decrease is due to the pandemic and lockdown that affects the overall economic status and every other industry and is a temporary change. However, after this gets resolved, the demands of the automobile will be sky-rocketing again, which will generate more vehicle production.
What are the government initiatives that play a part in the automobile industry?
Various private companies mainly own the vehicle production industry, but some government interferences impact the industry. Like the Government of India supports foreign investments in the automobile industry. This policy has resulted in several foreign companies collaborating and growing in the automobile sector.
Steps like the Union Cabinet outlaid almost ₹ 57,000 crores, equivalent to 7.81 USD for automobile sectors and industry. Recently, in 2021 – 2022 the Union Budget introduced the voluntary vehicle scrappage policy. The government took the approach due to achieving a clean environment and driver and pedestrian safety. But this can also be a chance for the automobile companies as it encourages people to remove old model vehicles and buy new ones.
The government has been trying to make amends and introduce more of the concept of environment-friendly vehicles such as electric cars in india.Therefore, they started the program to set up several vehicle battery charging points, similar to a gas station but more eco-friendly. This method also boosts up the introduction of batters vehicles hence, producing demand for the process.
The resulting factors due to the exponential growth of the automobile industry
The growth of any market and industry is beneficial for the economic state and profile of the country. The exponential growth of the automobile industry of India leads to several optimistic scenarios. First, the nation’s financial and economic health or condition gets a boost due to the massive growth in this field. Second, as every person needs transportation and wants to buy their own, this is a market where demand is ever-growing.
Opportunities like jobs for engineers, technical designers, and other workers also increase. Of course, there is the factor of competition. Foreign investors are also interested in this industry which makes the sector a perfect growing business industry.