EXECUTIVE SUMMARY

The auto-components industry accounted for 2.3 per cent of India’s Gross Domestic Product (GDP) in 2017-18. During the same period, 1.5
million people directly and 1.5 million people indirectly were employed in the auto-components industry. The auto components sector has
been observing robust growth with a turnover of US$ 51.2 billion in FY18 and turnover is anticipated to reach US$ 200 billion by FY26.
India's exports of auto components could account for as much as 26 per cent of the market by 2021. Auto-component production in 2018-19
is expected to increase 12-14 per cent in FY19, on the back of robust growth in domestic and export markets. Production of Two Wheelers,
Passenger Vehicles, Commercial Vehicles and Three Wheelers reached 24.50 million, 4.03 million, 1.11 million, and 1.27 million in 2018-19.
According to Department for Promotion of Industry and Internal Trade, FDI inflow in automotive* sector from April 2000 to December 2019
stood at US$ 21.38 billion.
Favourable government policies such as Auto Policy 2002, Automotive Mission Plan 2016-2026, National Automotive Testing and R&D
Infrastructure Projects (NATRiPs), have helped the Indian auto components industry achieve considerable growth. The government has also
extended the FAME Scheme from September 2018 to March 2019.
India is emerging as global hub for auto component sourcing. A cost-effective manufacturing base keeps costs lower by 10-25 per cent relative
to operations in Europe and Latin America. Relative to competitors, India is geographically closer to key automotive markets like the Middle
East and Europe.
 The growth of global OEM sourcing from India & the increased indigenisation of global OEMs is
Rising indigenisation turning the country into a preferable designing and manufacturing base.

The Indian auto-components industry is expected to register a turnover of US$ 100 billion by 2020
Increasing turnover
backed by strong exports ranging between US$ 80-100 billion by 2026.

Contribution to GDP and

The auto-components industry accounts for almost seven per cent of India’s Gross Domestic
employment
Product (GDP) and employs as many as 19 million people.

Growing automobile
India is expected to become the 4th largest automobiles producer globally by 2020 after China, US & Japan.
The auto components industry is also expected to become the 3rd largest in the world by 2025.

Among top steel  In 2016, India overtook Japan to become the 2nd largest producer of stainless steel in the world. Also, it
producers is one of the lowest cost stainless steel producers in the world.
 Automobile industry

Introduction

Automobile industry, the business of producing and selling self-powered vehicles, including
passenger cars, trucks, farm equipment, and other commercial vehicles. By allowing consumers
to commute long distances for work, shopping, and entertainment, the auto industry has
encouraged the development of an extensive road system, made possible the growth of suburbs
and shopping centers around major cities, and played a key role in the growth of ancillary
industries, such as the oil and travel businesses. The auto industry has become one of the largest
purchasers of many key industrial products, such as steel. The large number of people the
industry employs has made it a key determinant of economic growth.

The Indian auto industry became the 4th largest in the world with sales increasing 9.5 per cent
year-on-year to 4.02 million units (excluding two wheelers) in 2017. It was the 7th largest
manufacturer of commercial vehicles in 2018.
The Two Wheelers segment dominates the market in terms of volume 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.
India is also a prominent auto exporter and has strong export growth expectations for the near
future. Automobile exports grew 14.5 per cent during FY 2019. It is expected to grow at a
CAGR of 3.05 per cent during 2016-2026. 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 two-wheeler and four wheeler market in the world by 2020.
 Five salient features of Indian Automobile Industry

The Indian automobile industry is one of the pioneers of inclusive growth, community
development, social projects and general economic upliftment. It has seen towns getting
established and growing into bustling metropolises around the automobile manufacturing
eco-system.

1. SIAM works towards supporting a sustainable development of the Indian automobile

industry with the vision that India emerges as the destination of choice in the world for design
and manufacture of automobiles. It works towards making vehicles affordable & safer,
increasing productivity and achieving global standards of quality.

2. SIAM, the apex body of the Indian automotive sector, has pursued a vigorous corporate
citizenship agenda. Among the initiatives, SIAM introduced in the country, was a computerized
emissions-checking infrastructure for issuing Pollution under Control (PUC) certificates.

3. Further to this SIAM also piloted networking of these pollution check centers which enabled
the government to collect and analyze the emission data of vehicles running on our road.

4. SIAM, through its initiative – Society for Automotive Fitness & Environment (SAFE), has
pursued an integrated approach for a cleaner environment and a reduction in road accidents.
SIAM members in their own right have been contributing to the good of society.

5. In its outreach, SIAM has never forgotten that children and youth are tomorrow’s citizens.
It’s inclusive initiatives have always reached out to the next generation through awareness
drives and educational programs that focus on the greater good of society. SIAM believes that
today’s youngsters can be highly effective change agents in society
 Some more features in the Auto Industry

 Supply
 The Indian automobile market has some amount of excess capacity.
 Demand
 Rise in middle class income and young population may result in strong growth.
 Barriers to entry
 High capital costs, technology, distribution network, and availability of auto components.
 Bargaining power of suppliers
 Low, due to stiff competition.
 Bargaining power of customers
 Very high, due to availability of options.
 Competition
 High expected to increase even further.

Future Outlook

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.
PROSPECTS

 Strong growth in demand due to rising income, middle class, and a young population.
Indian automotive industry targeting to increase exports of vehicles five times in 2016-
26.
 Automotive Mission Plan: 2016-26 shows clear vision of government where it aims to
develop India as a global manufacturing center. Reforms like GST to help boost the
sector’s growth. Incubation center to be set up for startups working in electric vehicles
space.
 Focus shifting on electric cars to reduce emissions. Innovation is likely to intensify
among engine technology & alternative fuels. Government aims to build India into an
R&D hub. India could be a leader in shared mobility by 2030, providing opportunities
for electric and autonomous vehicles.
 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.
 Indian automotive industry (including component manufacturing) is expected to reach
Rs 16.1-18.1 trillion (US$ 251.4-282.8 billion) by 2026.