Melissa Florence

Driving Forces of India's Automotive and Auto Parts Sector

automotive, car

The automotive sector is just one of India’s greatest and fastest developing production sectors. With a turnover of US$13 B, the vehicle sector employs about .forty five million individuals specifically and ten million individuals indirectly, including soon after-income and servicing networks. This rated India as the 11th greatest passenger car producer in the environment. In the category of motorcycles and scooters, India is rated 1st and 2nd respectively. With India progressively liberalizing its industry location, several new joint ventures evolved, ensuing in shut to 2 dozen world car brands location up store in India

The car component phase is similarly robust, giving the full variety of elements needed by the domestic vehicle industry and now employs about 250,000 individuals. Although tiny by world benchmarks, this phase is developing promptly as a final result of its low prices and growing top quality. Income turnover of elements is believed to have arrived at US$ B in 2004/05, 29% increased than the earlier yr. Noticeably, car component brands source to two forms of customers – unique devices brands (OEM) and the substitute industry. Above 300 tiny and medium corporations specifically support the OEMs assembling autos in India. Downstream, shut to 5,000 other micro firms are doing work for these Tier one suppliers, as very well as for the substitute industry

The sector can be segmented into 2. Just one is the vehicle phase. The other is the car elements phase. The crucial production areas for these 2 segments are very well unfold throughout the region.

The development of India’s automotive sector is driven by the crucial forces under:


Automotive similar imports are largely in car elements, accounting for a lion’s share of eighty five%. These imports will feed the production crops, generating autos for domestic industry as very well as export industry.

As the need from the domestic industry raises with growing affluence, manufacturing will increase in tandem, consequently requiring much more imports of elements, specifically individuals of increased precision which nonetheless are unable to be accomplished in India. Global players in India nonetheless have to have to import quite massive volume of car elements for their vehicle assembly as top quality and technological benchmarks of car elements sourced from in India may possibly not fulfill their superior benchmarks. The predicted Enhance in exports of India-created autos will also add to import development of car elements.


Automotive similar exports expanded promptly in modern decades. Car exports grew at a compound once-a-year development amount of 46% between 2001 and 2006. Export share of manufacturing amplified from 3% in 2001 to eight% in 2006. The development is boosted by these several variables these types of as India’s price competitiveness in terms of labor and raw material recognized production foundation economies of scale owing to domestic industry likely to harness world brand impression of the parent business, as very well as the world hub policy for tiny automobiles like Hyundai, Suzuki, etc

Most automotive exports go to building nations around the world in Asia, exactly where economical automobiles can uncover a industry. Egypt, Kenya and Nigeria are significant locations for India’s automotive exports. A lot more not long ago, as the top quality and know-how of India-created vehicles have improved and met stringent requirement of the intercontinental industry, some automobiles have located customers even in Western Europe.

Similarly for car elements, exports have been developing at a compound once-a-year development amount of 25% over 2000-2005. Share of exports in overall manufacturing amplified to eighteen% in 2005 from ten% in 1997. Overseas carmakers in abundant nations around the world are progressively turning to India for elements, as low prices, fairly fantastic know-how foundation and access to inexpensive raw material make India hugely competitive in its car elements exports.

The main export markets are the United states of america, Germany, Japan, Sweden, the British isles and Italy. Asia, Africa and the Middle East together choose up 44% of India’s car part exports.

Regulatory/Govt attempts

Govt attempts and regulatory frameworks are also crucial driving forces to the automotive industry in India. At the moment, a hundred% international direct financial commitment in the automotive industry, with no required minimum level of financial commitment is authorized. No neighborhood tie up is required given that the sector has by now been totally de-certified and deregulated. This presents a potent impetus for world car players to set up store in India. Additional, excise responsibility and personalized taxes have also been held competitive in order to make participation in the automotive industry conducive

On major of these, an Automotive Mission System 2006-2016 is also remaining drafted to produce the domestic sector, as very well as the export industry. It aims to produce India into a premier automotive hub. Going ahead, India targets to turn out to be just one of the major 5 automotive economies by 2025

Global Agreements

Trade/economic co-operation agreements between India and the region or other intercontinental markets will boost India’s exports of both of those vehicle and elements to the region/intercontinental markets. Likely ahead, the likely agreements are: TVS Group’s approach to invest in Indonesia to manufacture 2-wheeler FTA between India and ASEAN (negotiation in development) would also provide possibilities for direct trade and financial commitment between India and ASEAN nations around the world FTA with nations around the world like China, Korea, Japan, Chile, etc

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