Driving Forces of India’s Automotive and Automobile Sections Sector

The automotive sector is a person of India’s most significant and swiftest rising production sectors. With a turnover of US$thirteen B, the auto sector employs about .45 million individuals instantly and ten million individuals indirectly, like following-income and servicing networks. This ranked India as the 11th most significant passenger car producer in the world. In the group of bikes and scooters, India is ranked 1st and 2nd respectively. With India increasingly liberalizing its market position, numerous new joint ventures developed, resulting in near to 2 dozen international car makers location up store in India

The car part segment is similarly sturdy, providing the whole variety of components demanded by the domestic auto industry and currently employs about 250,000 individuals. Whilst small by international criteria, this segment is rising speedily as a consequence of its small expenses and soaring high-quality. Gross sales turnover of components is approximated to have attained US$eight.7 B in 2004/05, 29% larger than the earlier yr. Noticeably, car part makers supply to two sorts of potential buyers – unique products makers (OEM) and the alternative market. Over 300 small and medium organizations instantly service the OEMs assembling autos in India. Downstream, near to 5,000 other micro corporations are performing for these Tier one suppliers, as well as for the alternative market

The sector can be segmented into 2. A person is the auto segment. The other is the car components segment. The vital production locations for these 2 segments are well distribute throughout the state.

The expansion of India’s automotive sector is pushed by the vital forces under:


Automotive associated imports are mostly in car components, accounting for a lion’s share of 85%. These imports will feed the production crops, creating autos for domestic market as well as export market.

As the demand from customers from the domestic market raises with soaring affluence, manufacturing will increase in tandem, as a result demanding additional imports of components, primarily individuals of larger precision which even now can not be carried out in India. Worldwide gamers in India even now need to have to import pretty significant quantity of car components for their auto assembly as high-quality and technological criteria of car components sourced from in just India may not fulfill their higher criteria. The expected Improve in exports of India-designed autos will also add to import expansion of car components.


Automotive associated exports expanded speedily in new several years. Vehicle exports grew at a compound yearly expansion charge of 46% among 2001 and 2006. Export share of manufacturing elevated from 3% in 2001 to eight% in 2006. The expansion is boosted by these many elements these kinds of as India’s price competitiveness in terms of labor and raw product founded production base economies of scale thanks to domestic market probable to harness international manufacturer graphic of the guardian organization, as well as the international hub plan for small cars and trucks like Hyundai, Suzuki, etcetera

Most automotive exports go to establishing international locations in Asia, exactly where inexpensive cars and trucks can come across a market. Egypt, Kenya and Nigeria are critical locations for India’s automotive exports. Far more just lately, as the high-quality and know-how of India-designed vehicles have enhanced and fulfilled stringent necessity of the worldwide market, some cars and trucks have located potential buyers even in Western Europe.

Equally for car components, exports have been rising at a compound yearly expansion charge of 25% above 2000-2005. Share of exports in whole manufacturing elevated to eighteen% in 2005 from ten% in 1997. Overseas carmakers in prosperous international locations are increasingly turning to India for components, as small expenses, comparatively fantastic know-how base and obtain to low-priced raw product make India extremely competitive in its car components exports.

The principal export marketplaces are the United states, Germany, Japan, Sweden, the British isles and Italy. Asia, Africa and the Center East jointly take up forty four% of India’s car element exports.

Regulatory/Authorities initiatives

Authorities initiatives and regulatory frameworks are also vital driving forces to the automotive industry in India. At present, 100% overseas direct investment decision in the automotive industry, with no obligatory minimal level of investment decision is allowed. No local tie up is essential given that the sector has presently been entirely de-licensed and deregulated. This supplies a solid impetus for international car gamers to established up store in India. More, excise duty and tailor made taxes have also been stored competitive in get to make participation in the automotive industry conducive

On best of these, an Automotive Mission Plan 2006-2016 is also becoming drafted to acquire the domestic sector, as well as the export market. It aims to acquire India into a leading automotive hub. Relocating ahead, India targets to develop into a person of the best 5 automotive economies by 2025

Intercontinental Agreements

Trade/financial co-procedure agreements among India and the area or other worldwide marketplaces will increase India’s exports of the two auto and components to the area/worldwide marketplaces. Likely ahead, the probable agreements are: TVS Group’s plan to make investments in Indonesia to manufacture 2-wheeler FTA among India and ASEAN (negotiation in development) would also offer you possibilities for direct trade and investment decision among India and ASEAN international locations FTA with international locations like China, Korea, Japan, Chile, etcetera