Revving Up Indian Automotive Sector : Identifying Profitable Niches

Indian Automotive Sector: Gearing Up to Emerge as a Global Market Leader

Indian automotive sector is attaining pace following a growth rate of 8.68% over the last year and presently with an annual average production of 22.36 Million vehicles, it is seventh largest producer of vehicles globally. The automotive sector contributes 7.1% of country’s GDP by volume. It is expected that India will be third largest automotive market by volume, by 2016 and the annual sale of vehicles by 2020 will be approximately 6 Million. Hence, it is estimated that the Indian automobile market will account for 5% of global vehicle sales. Further, India is the second largest two-wheeler manufacturer, the largest motorcycle manufacturer and the fifth largest commercial vehicle manufacturer in the world.

Key Drivers for the Growth of Automotive Sector in India

Key Drivers for growth of Automotive Sector-eninconperspectives.com

Automotive Component Industry: Survival Instinct tested owing to global economic uncertainties and domestic monetary tightening measures

The Indian Automotive Component industry have faced many ups and downs in past, but has managed to experience healthy growth in the last few years. An optimistic end-user market, improved customer sentiments and return of adequate liquidity in the financial system in the recent past, acted as a catalyst in the growth of auto component industry. The industry is likely to witness growth in FY 16 owing to higher exports and domestic demand recovery. The snapshot of the future of component industry can be seen in Exhibit 02, which gives positive sentiments for the sector in the future.

Indian Automotive Component Industry Futuristic Snapshot-eninconperspective.com

A growing working population, expanding middle class population, the presence of large pool of skilled and semi skilled workforce, increased R&D operations, reduction in excise duties and taxes, 100% Foreign Direct Investment (FDI) and multiple sector policies like Auto Policy 2002, Automotive Mission Plan (AMP) 2016-26, National Automotive Testing  And R&D Infrastructure Project (NATRIP) and Faster Adoption & Manufacturing of Electric Hybrid Vehicles (FAME April, 2015) will contribute to accelerated development of the automotive component industry in long term. Although, in order to throttle the growth drivers some of the factors which should be taken into consideration are :-

  • Ensuring a secure and robust logistics and supply chain network with localized procurement and distribution facilities.
  • The thrust shall be given to R&D sector by flowing in more investments, which will enable to co own the product development with OEM.
  • Access to new technologies through collaborations and strategic M&A will also play a vital role in overall growth of industry.
Development of Green Vehicles: Alternate Source of Energy for Transport which should be Eco Friendly yet Cost-Effective

The automotive industry of India is passing through a paradigm shift. The last century has been the era of internal combustion engines  primarily on account of ease of use, availability and low-cost fossil fuels. But scenario is not the same as it used to be, with fast depleting fossil fuels, rapid increase in energy cost and impact of transportation on the environment, demands a swift shift to electric mobility.

Development of Green Vehicles in India-eninconperspectives

National Electric Mobility Mission Plan 2020 focuses to enhance national energy security, mitigating the adverse impact of vehicles on environment and growth of domestic manufacturing capabilities. Exhibit 04 enlists the plan envisaged by GoI, which creates positive sentiments for the investors and to the stakeholders of the entire value chain of the automotive industry.

NEMPP 2020 Objectives-enenconperspectives.com
Indian Commercial Vehicle Segment: Trends showing sign of recovery

Some segments of the domestic Commercial Vehicle (CV) industry is expected to recover during FY 2016 after showing signs of recovery in FY 2015. Although, the growth will only be possible if bottlenecks like liquidity and finances are addressed, further the long term driver of the segment will be the infrastructural development which is expected to take place in the future. The segment will gain growth momentum as the government lifts mining bans, Government’s push for infrastructural development, increased freight movement and positive consumer sentiments.

Indian CV Industry Futuristic Snapshot-eninconperspectives.com

The Indian automotive industry is expected to evolve in all facets in the coming years. With the advancements in technology and increasing purchasing power of the consumers the automotive industry is expected to shift a gear and accelerate at a pace which has been never achieved in past. The government support and investment in the technology along with the variety of the options available for consumers will be the key driver of the growth of Indian automotive industry.

Ultimate Growth Drivers of Indian Automotive Sector-eninconperspectives.com

 

*The views expressed in this article are solely those of enincon perspectives and do not necessarily represent those of Enincon LLP.

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