30/09/2024
India’s automotive industry has set ambitious goals, aiming to become a $1 trillion annual revenue industry by 2035, with an additional $400 billion from exports, according to a report by management consulting firm Arthur D Little. This represents significant growth from its current value of $250 billion.
Key strengths of the Indian automotive industry include cost competitiveness, a skilled workforce, and a growing population. Government investments in road infrastructure have also boosted demand for commercial vehicles.
To achieve these goals, the Indian automotive industry must focus on several key areas: Enhancing global competitiveness by improving vehicle quality and performance, investing in research and development to drive innovation, and expanding exports to new markets, particularly in Africa and Latin America.
India has attracted significant foreign investment in its automotive sector, driven by the China-plus-one policy. Major investments include Hyundai’s $1.4 billion investment to expand capacity and develop new products, Volkswagen’s $1 billion investment in electric vehicle production, Stellantis’ $2.5 billion investment in electric vehicle production, and Mercedes-Benz’s $1.5 billion investment in vehicle production.
We expect the Indian automotive industry to grow in single digits in FY24 due to factors like higher interest rates, supply chain disruptions, and slower rural recovery. Nevertheless, there are factors that could bolster the industry’s performance. These include an improved product mix with a greater focus on premium vehicles, which could drive demand, particularly in the passenger vehicle segment with expected growth of 7-9% during FY24-27. Additionally, the transition to hybrid and electric vehicles, as well as infrastructure development and the growth of e-commerce, are anticipated to boost demand, particularly in the commercial vehicle segment, where growth of 8-10% is projected during FY24-27.
Overall, India’s automotive industry is on a trajectory to become a global automotive manufacturing hub, positioning itself alongside countries like Japan, Germany, and South Korea, which generate over $500 billion annually from the automotive sector.