Gearing Up for Growth in India’s Automotive Industry

03 Apr 2022   |  India Competitive Intelligence

The automotive industry in India is one of the economy’s biggest drivers. To date, the country is in the top five car manufacturing countries around the world. India is also the largest two- and three-wheeler car manufacturer. The automotive market in India also continues to grow, with the demand for cars surging as the country recovers from the COVID-19 pandemic.

It hasn’t always been an easy road. In 2019, India logged a record loss in the automotive industry due to economic contractions, and before it can even recoup, the pandemic hit. However, India remains to have a competitive advantage in the car manufacturing sector, and with the help of skilled labor and engineering talent, they were able to recover due to the demand for personal transport.

What are the current auto trends in India, and how can businesses leverage their position in the global auto industry and expand in Asia?

Top Gear Automotive Growth in India

Electric Car

India aims to be the world’s third-largest automotive manufacturer by 2026. As the economy continues to grow, the automotive market in India also enjoys rapid expansion. Rapid digitalization and favorable government policies helped the sector enter 2022 with a positive outlook.

According to a recent report, the automotive industry accounts for 7.1% of the country’s GDP. It has also generated over 35 million jobs in the country. The passenger vehicle market in India is also expected to grow by 22% to 25% in 2022.

Some of the current auto trends in India include the growing SUV and hatchback market, led by the country’s two largest car manufacturers, Maruti Suzuki and Tata Motors. Hatchbacks are the most popular segment, earning 47% of the market share from 2020 to 2021. The SUV segment also grew to 32% in the same period.

As the automotive industry is highly dependent on intensive labor, India is gearing towards automation. Additionally, the sector must continue to set its sights on the international market. While it enjoys great success domestically, India can supply high-quality vehicles and components worldwide.

Gearing Up for EVs

Like many other car manufacturing countries, India is also expanding to electronic vehicle (EV) production. The government has implemented the National Electric Mobility Mission Plan to fast-track the adoption of EVs in the country.

Investments continue to pour in for the EV sector in India. In 2019, it reached US$397 million, recording a 170% increase from the previous year. The Ministry of Road Transport & Highways reported that EV sales soared to a 160% increase in 2021, with two-wheelers leading the pack in this segment.

The government is dedicated to decreasing greenhouse gas emissions in India by buying into the EV segment. They launched the Faster Adoption and Manufacturing of Hybrid & Electric Vehicles in India (FAME India) initiative to reduce the production and use of petroleum-powered vehicles in the country. Currently, Phase II is now promoting the production and use of electric public and shared transportation.

As India continues to gain more market share in automotive manufacturing and components production worldwide, there is no better time to invest in the industry than now. With proper government support and a wealth of skilled labor to harness the industry’s potential, investments are going to be very viable as the Indian automotive market gears up for greater growth.

Read Other Insights
E-commerce in India
The Booming Growth of E-commerce in India

How can India sustain its current e-commerce penetration, and will it continue to rise in the coming years?

Investment Opportunities in India
Looking at Business Investment Opportunities in India

How can India secure the future of investments in their country and attract more foreign direct investments to support their economy?

India’s Automotive Industry
Gearing Up for Growth in India’s Automotive Industry

What are the current auto trends in India, and how can businesses leverage their position in the global auto industry to expand in Asia?

Consumer Trends in India
Consumer Trends in India

Consumer behavior in India points towards a steadily growing e-commerce economy driven by rising internet penetration.