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India is a prominent player in the global automotive market

Between April 2000 and December 2017, the automotive industry has attracted an FDI worth $18.41 bn. In the automotive industry China is currently the market leader in the automotive industry with the fourth-largest reserve of cobalt and highest reserve of lithium. Other countries that have the raw material reserve needed for the demands of the future market are Argentina, Brazil and Chile.

Currently India can reap some great advantages from the changing automotive market, if it is successful in overcoming some of the challenges. As the currently is grossly deficient in its lithium and cobalt reserves, it should start to store lithium heavily. The worst part is there is a high GST of 28% levied on the import of lithium. Cobalt too is only available in Orissa, Nagaland and Jharkhand in India and needs to be imported. However, what differentiates India from other countries (especially the developed nations) is its strong emerging market. With disposable income increasing at the hands of the world’s youngest population, India is going to be a major player in the world’s fastest growing automotive industry.

The global automotive industry is moving towards a new era with electrification of vehicles being a key driver. The automotive industry has the potential to be a game changer as far as power roles are concerned. The automotive sector currently stands at a global worth of over $2.4 trillion, contributing significantly to any nation’s GDP.  The world economy might face a huge disruption with automobile transforming from oil-driven to lithium and cobalt. IoT is also being a major disruptor in the automotive sector as this technology is introducing the idea of connected vehicles. The world is preparing to witness a new form of mobility.

Factors contributing to the growth of the automotive industry in India

Favorable demographic trends: the automotive sector is currently contributing around 7% of India’s GDP. As the Automotive Mission Plan 2016-26, Indian automotive industry is set to increase this contribution to 12%. This can be achieved with major part of the population moving to urban areas. It is estimated that 500 million people will be living in cities by 2030. Also macroeconomic trends where income is will increase in proportion to disposable income will enable 60 million households to buy cars by 2025.  In fact by 2020 67% of the population will join the workforce, and some of them will be able to straight enter the four-wheeler segment.

Consistent governmental support: the government of India has taken initiatives like the Automotive Mission Plan and National Electric Mobility Mission Plan to facilitate two goals—achieve long-term growth in the automotive sector and reduce dependence on oil and thereby also control pollution through emission.  The Automotive Mission Plan 2026 targets to increase the industry revenue to three times and also expand export sevenfold up to $80 billion. In order to meet these targets, the sector will contribute more than 60 million jobs.

India as a manufacturing hub: According to the World Economic Forum India is ranked 30th on the global manufacturing index. The government’s “Make in India” initiative has played a huge role in contributing to the fast growth of the automotive sector.

Conclusion

There are some key trends that are shaping the automotive industry in India. IoT is penetrating the automotive sector and contributing to the concept of ‘connected vehicles’. Several connectivity linking applications are now being explored by the Indian market. Some early signs of adoption are visible in the Indian ecosystem. Electrification has just begun in India. This has been possible due to declining prices of batteries and supportive policies of the government. The local government of ten cities with more than one million population have placed order for 390 electric buses. One major reason for adopting electric cars is to control pollution. India is still not as open as China to the idea of shared mobility. However, there is a major shift that one can now notice in the automotive sector.

 

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