Making India a world class automotive manufacturing hub

Date: 13 May 2016

The Indian automotive industry is witnessing testing times. The market continues to experience volatility and EY is waiting to see clear signs of a revival in growth.

With the government and the judiciary taking steps to make transport cleaner and safer, there is some degree of uncertainty for automakers, especially regarding the fuel mix and the necessary investments for technology upgrades. EY believes that these are just short-term challenges, as the long-term growth story for the automotive industry in India remains intact.

As the country looks to establish its credentials as a manufacturing destination, there are some key steps that need to be taken:

  • Creating an enabling regulatory environment
  • Developing the requisite talent and skills
  • Fast-tracking infrastructure development
  • Incubating an R&D and innovation culture
  • Enhancing supply chain competiveness

India’s automotive market offers huge growth potential

The auto sector is one of the most important contributors to GDP and employment in India, with huge potential for growth. The sector accounts for 7% of India’s GDP, 45% of manufacturing GDP and employs about 19 million people, directly and indirectly.

Further, the sector contributes around 4.3% to India’s total exports and 13% to the country’s excise revenues.

Over the years, the Indian auto industry has emerged as one of the world’s largest, with annual sales of 19.8 million vehicles in FY15. It is also one of the fastest growing auto markets, with production of 23.4 million vehicles in FY15, and it holds a leading position in several sub-segments.

The Indian Government’s Automotive Mission Plan 2016–26 envisages four-fold growth by FY26

The Indian auto sector has the potential to generate up to US$300b in annual revenue by 2026, create around 65 million additional jobs and contribute more than 12% to India’s GDP, according to the Automotive Mission Plan 2016–26 prepared jointly by the Society of Indian Automobile Manufacturers and the Government.

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