Automotive industry in India
India is one of the four largest car manufacturing countries in the world and offers car manufacturers an attractive sales market.
Contact usIndia is one of the four largest automakers in the world and offers carmakers an attractive market. In India, demand for passenger cars does not seem to be slowing down. On the contrary, with a rapidly growing labour force and a middle class with an increasingly higher disposable income, more and more Indians can afford a car. India is expected to be the world’s third largest car market by 2030.
As such, the automobile industry accounts for 7.1% of India’s total GDP. The Indian government wants to increase that share to 12% of GDP, thereby creating 65 million jobs and tripling the turnover of the Indian car industry.
India is therefore an interesting manufacturing location for international car companies. In India, about 87% of car owners are willing to switch to electric vehicles. As a result, the industry already attracted 19.3 billion dollars in investment between 2000 and 2018 and expects to attract another 8-10 billion dollars in foreign investment, including from Tesla.
The growth of the sector provides plenty of opportunities for foreign companies. International companies can also draw on a large pool of cheap, skilled labour in India.
Snapshot of the automotive industry in India
- Commercial vehicle exports grew 83% in 2022 compared to 2021. Overall, India’s car exports grew 36% in 2022.
- The auto parts industry accounts for 25% of the manufacturing GDP. 25% of the total production of auto parts is exported.
- Foreign direct investment (FDI) of 100% under the automatic route is allowed in this sector.
- The Indian automotive industry is the fifth largest auto market and the seventh largest commercial vehicle manufacturer.
- The Indian passenger car market was valued at 33 billion dollars in 2021 and is expected to reach 55 billion dollars by 2027. The electric vehicle (EV) market in India is estimated to be valued at 8 billion dollars by 2025.
- The Indian car market was valued at 100 billion dollars in 2021 and is expected to be worth 160 billion dollars by 2027, that is a CAGR of 8.1% from 2022 to 2027.
Growth drivers of the automotive industry in India
- India is expected to be the world’s third-largest car market by 2026.
India could be a leading market in shared mobility by 2030, providing opportunities for electric and autonomous vehicles. - New policies are driving the retirement of old, polluting vehicles, which will increase demand for clean (electric) vehicles.
- The electric vehicle (EV) market in India is estimated to be worth 7 billion dollars by 2025 and will generate 50 million jobs by 2030.
- The Government of India encourages foreign investment in the automotive sector through its Automotive Mission Plan 2016-2026 and allows 100% Foreign Direct Investment in the industry.
Interesting investment opportunities
- Passenger vehicles: passenger cars, commercial vehicles, multipurpose vehicles.
- Two-wheelers: mopeds, scooters, and motorbikes.
- Tricycles: passenger and freight vehicles.
- Commercial vehicles: light commercial vehicles, medium and heavy commercial vehicles.
- High demand for low-cost electric vehicles suitable for safe short-distance commuting (50-100 km/ride on average) and robust enough to drive reliably through Indian summers and monsoons.
