Automobile Industry

Automobile Industry

Automobile Industry


  • The Automobile industry in India is a significant driver of macroeconomic growth and technological development.
  • The Automobile industry holds a 7.1% share in India’s GDP.
  • India is projected to be the world's third-largest automotive market in terms of volume by 2026.
  • India has 4 large auto manufacturing hubs: Delhi-Gurgaon-Faridabad in the North, Mumbai-Pune-Nashik-Aurangabad in the West, Chennai- Bengaluru-Hosur in the South and Jamshedpur-Kolkata in the East.
  • The Automobile industry manufactured 30.9 Mn vehicles including passenger vehicles, commercial vehicles, three-wheelers, two-wheelers and quadricycle in FY 2018-19. 
  • Out of 30.9 Mn vehicles manufactured in FY 2018-19, India has exported 4.6 Mn.
  • The FDI equity inflow received by the Automobile Industry in FY 2019-20 is valued at USD 2.82 Bn.
  • The Department of Heavy Industry has helped set up India's first Machine Tool Park Park (TMPT) is a world class facility that has been developed on 530 acres of land.


The Indian auto industry is one of the largest in the world. The industry accounts for 7.1 per cent of the country’s Gross Domestic Product (GDP). The Two Wheelers segment with 80 per cent market share is the leader of the Indian Automobile market owing to a growing middle class and a young population. Moreover, the growing interest of the companies in exploring the rural markets further aided the growth of the sector. The overall Passenger Vehicle (PV) segment has a 14 per cent market share.
India is also a prominent auto exporter and has strong export growth expectations for the near future. Overall automobile exports grew 13.01 per cent year-on-year between April-December 2017. In addition, several initiatives by the Government of India and the major automobile players in the Indian market are expected to make India a leader in the 2W and Four Wheeler (4W) market in the world by 2020.


  • Domestic automobiles production increased at 2.36 per cent CAGR between FY16-20 with 26.36 million vehicles being manufactured in the country in FY20. Overall, domestic automobiles sales increased at 1.29 per cent CAGR between FY16-FY20 with 21.55 million vehicles being sold in FY20.¬
  • Two-wheelers and passenger vehicles dominate the domestic Indian auto market. Passenger car sales are dominated by small and mid-sized cars. Two-wheelers and passenger cars accounted for 80.8 per cent and 12.9 per cent market share, respectively, accounting for a combined sale of over 20.1 million vehicles in FY20.
  • Overall, automobile export reached 4.77 million vehicles in FY20, growing at a CAGR of 6.94 per cent during FY16-FY20. Two-wheelers made up 73.9 per cent of the vehicles exported, followed by passenger vehicles at 14.2 per cent, three-wheelers at 10.5 per cent and commercial vehicles at 1.3 per cent.
  • EV sales, excluding E-rickshaws, in India witnessed a growth of 20 per cent and reached 1.56 lakh units in FY20 driven by two-wheelers.
  • Premium motorbike sales in India recorded a seven-fold jump in domestic sales, reaching 13,982 units during April-September 2019. The sale of luxury cars stood between 15,000 to 17,000 in the first six months of 2019.
  • Production of passenger vehicles, commercial vehicles, three-wheelers and two-wheelers grew at 11.27 per cent year-on-year between April-December 2017 to 21,415,719 vehicles. The sales of passenger vehicles and two-wheelers grew by 5.22 per cent and 40.31 per cent year-on-year respectively, in December 2017.

What are the investment scope in the automobile industry in India?

  • Passenger vehicles: passenger cars, utility vehicles, multi-purpose vehicles.
  • Two-wheelers: mopeds, scooters, and motorcycles.
  • Three-wheelers: passenger carriers, goods carriers.
  • Commercial vehicles: light commercial vehicles, medium and heavy commercial vehicles.
  • Huge demands for low-cost electric vehicles that are suited for safe short-distance urban commutes (averaging 50-100 km/trip) that are rugged enough to perform reliably through India's summers and monsoon. 


The Government of India encourages foreign investment in the automobile sector and allows 100 per cent FDI under the automatic route.
Some of the recent initiatives taken by the Government of India are: 


  • The Automotive Mission Plan 2016-26 (AMP 2026) outlines the trajectory of growth of the automotive ecosystem in India, including the glide path of definite regulations and policies that govern research, design, technology, testing, manufacturing, import/ export, sale, use, repair, and recycling of automotive vehicles, components and services.
  • The Automobile industry is projected to be the third-largest in the world, contributing 12% to GDP.
  • The industry has the potential to generate USD 300 Bn in revenue and 65 mn additional jobs by 2026.
  • The Automobile industry is one of the prime movers of the manufacturing sector and “Make in India” initiative. It aims to increase exports of vehicles by five times. The growth of vehicles, particularly the passenger vehicles, is expected to triple to 9.4 mn units per annum by 2026.
  • The plan also foresees India to be the first in the world in production/sale of small cars, two-wheelers, three-wheelers, tractors and buses; and third in passenger vehicles and heavy trucks.


The automobile industry is supported by various factors such as availability of skilled labour at low cost, robust R&D centres and low-cost steel production. The industry also provides great opportunities for investment and direct and indirect employment to skilled and unskilled labour.
The Indian automotive aftermarket is estimated to grow at around 10-15 per cent to reach US$ 16.5 billion by 2021 from around US$ 7 billion in 2016. It has the potential to generate up to US$ 300 billion in annual revenue by 2026, create 65 million additional jobs and contribute over 12 per cent to India’s Gross Domestic Product.

EXCHANGE RATE USED: INR 1 = US$ 0.015 as of January 4, 2018
REFERENCES: Media Reports, Press Releases, Department of Industrial Policy and Promotion (DIPP), Automotive Component Manufacturers Association of India (ACMA), Society of Indian Automobile Manufacturers (SIAM), Union Budget 2015-16, Union Budget 2017-18

Disclaimer: This information has been collected through the secondary source and ASC is not responsible for any errors in the same.

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