Indian Auto Sector Gears Up To Tap Global Export Market

The assertion came from none other than the Prime Minister Narendra Modi, while addressing the SIAM members few months ago. He highlighted that the automobile sector will play a key role in driving higher economic growth, which will be further fuelled by rising demand. He asked the auto industry to embrace global best practices in India, while advancing green and clean mobility solutions. Significantly, the Indian automotive industry already contributes 6.8 per cent to national GDP and 40 per cent to manufacturing GDP, making India the third-largest automotive market, surpassing Japan. The Indian Automotive Industry has seen domestic sales growing by 12.5 per cent and all four segments have posted growth in the last financial year.

The sector provides employment to 37 million people. That’s not all. The industry holds a 4.7 per cent share in India’s exports and accounts for 40 per cent of global R&D. Notably, India plays a significant role in the global heavy vehicle market, as the largest tractor manufacturer, the second-largest bus manufacturer and the third-largest heavy truck manufacturer worldwide. The Indian automotive market has witnessed significant growth, reaching a value of $116.86 billion in 2023, reflecting an 8.10 per cent growth from $108.10 billion in 2022. Coupled with these, annual electric vehicle (EV) sales in India are expected to touch the one crore by 2030 and the home-grown EV market is set to become a Rs20 lakh crore opportunity by 2030. All these unequivocally point to the crucial role the auto sector is playing in India’s overall economic and sustainable growth.

It is also pertinent here to mention that the sector has attracted $36 billion in Foreign Direct Investment (FDI) over the past four years, highlighting India’s growing prominence in the global automotive landscape. Major international players are making substantial commitments, with Hyundai planning a $4 bn (Rs33,200 cr) expansion, while Mercedes-Benz has pledged $360 mn (Rs3,000 cr). Recently, Toyota announced a $2.3 bn (Rs20,000 cr) investment to further increase its capacity. The allowance of 100 per cent FDI under the automatic route in India’s automotive sector further enhances its attractiveness to investors, making the country a compelling destination for a global automotive hub.

Interestingly, government initiatives such as the Production-Linked Incentive (PLI) Scheme have been particularly successful, attracting a proposed investment of Rs67,690 crore, surpassing the initial target estimate of Rs42,500 crore over a five-year period. Additionally, proactive measures such as ‘Make in India’, the Foreign Trade Policy (FTP) and schemes like the Advance Authorisation and Export Promotion Capital Goods Scheme have been implemented, boosting manufacturing and automobile exports. Digital adoption and technological upgrade have emerged as key driving factors, with the adoption of connected automotive technology witnessing a rise in India. This facilitates integrating vehicles with internet connectivity, enabling features such as real-time navigation, remote diagnostics and vehicle-to-vehicle interaction.

Looking at the future, the Indian automobile industry is poised for significant growth and is projected to grow from $116.86 billion in 2023 to $217.90 billion by 2031, indicating a CAGR of 8.1 per cent. This growth will be driven by several factors, including increasing domestic demand and favourable government policies, and last, but not the least, the industry’s ability to adapt to future trends such as the rising demand for electric vehicles. Government support through policies and initiatives like Automotive Mission Plan 2026, and scrappage policy will also play a crucial role in driving this growth.