The $ 93 billion automotive industry contributes 7.1% to India’s GDP

India is a well recognized automobile manufacturing hub in the world because of its low cost production. Cheap labor, easy availability and low cost of raw materials and weak currency are the factors that are driving manufacturing Industry. 

India is the 7th largest producer of automobiles in the world with an average annual production of 23.36 Million vehicles and is expected to become the 3rd largest automotive market by volume.

Automobile accounts for 7.1% of the country's GDP by volume. As expected, more than six million vehicles will be sold annually in India, by 2020. Automobile component industry reached a mammoth US$ 41 billion in FY 2014-15 and is expected to reach US$ 110.7 billion by 2020. Growing working population and expanding middle class are the main drivers for the growth of automobile and automobile components industry in India.

India is the largest tractor manufacturer, 2nd largest two- wheeler manufacturer, 2nd largest bus manufacturer, 5th largest heavy truck manufacturer, 6th largest car manufacturer and 8th largest commercial vehicle manufacturer.

For every vehicle produced, direct and indirect employment opportunities are created with employment of 13 persons for each truck, 6 persons for each car and 4 for each three- wheeler and one person for two-wheelers.  The $ 93 billion automotive industry contributes 7.1% to India’s GDP and almost 49% to the nation’s manufacturing GDP (FY 2015-16).

As a major employment generator, GDP contributor and FDI earner, the automotive industry is instrumental in shaping the country’s economy and hence regarded as a 'Sunrise sector' under Make in India.

In order to further promote the sector, initiatives are being undertaken by the Government of India to promote innovation and R&D and create a favourable policy regime to make India a prominent manufacturing destination.

The Automobile Mission Plan 2016 – 2026 envisages creating India as one of the top three automobile manufacturing centres in the world with gross revenue of US $ 300 bn by 2026.

Leading global players like ISUZU Motors, FORD Motor, Tata Motors, and Suzuki Motor have invested heavily in the manufacturing sector resulting in the setup of new assembly lines, manufacturing and greenfield units thus boosting the manufacturing ecosystem in India.

Tata Motors and Fiat Ltd have set up joint assembly line to manufacture SUV cars at Ranjangaon unit (Pune), with an investment of US $ 280 mn.

Magneti Marelli, Fiat’s component manufacturing arm, opened a new manufacturing facility for the production of robotized gearboxes, in October 2015.

Pune based Force Motors inaugurated its Rs 100 crore greenfield plant in June 2016 for supplying engines and axles to Mercedes- Benz India.

Suzuki initiated a greenfield project in car and power train manufacturing in June 2015 near Ahmedabad, Gujarat.

Mercedes Benz inaugurated  its second manufacturing facility in Chakan in July 2015.

Sales of Passenger vehicles increased by 7.24% in FY 2015-16 over the same period previous year. Within the Passenger Vehicles, Passenger Cars, Utility Vehicles and Vans grew by 7.87%, 6.25% and 3.58% respectively in FY 2015-16 over the same period previous year.

Overall Commercial Vehicles segment registered a growth of 11.51% in FY 2015-16 as compared to the same period previous year. Medium & Heavy Commercial Vehicles (M&HCVs) registered a growth at 29.91% and Light Commercial Vehicles grew marginally by 0.30% in FY 2015-16 over the same period previous year.