Auto Industry in India: Overview and Future Outlook

Automobile Industry comprises all the automobile vehicles including Passenger Vehicles, Commercial Vehicles, Three Wheelers, Two Wheelers and Quadricycles.


Geographical Distribution

The majority of India's car manufacturing industry is evenly divided into three "clusters"-

  1. Around Chennai is the southernmost and largest, with a 35% revenue share, accounting for 60% of the country's automotive exports.

  2. Near Mumbai, Maharashtra, along the Chakan corridor near Pune, is the western cluster, with a 33% share of the market.

  3. The northern cluster is around the National Capital Region, and contributes 32%. Gurgaon and Manesar, in Haryana, are where the country's largest car manufacturer, Maruti Suzuki, is based.

An emerging cluster is the state of Gujarat, with a manufacturing facility of MG Motors, Ford, Oculus Auto and Maruti Suzuki.

Kolkata with Hindustan Motors (inactive), Noida with Honda, and Bengaluru with Toyota, Volvo and Scania and Andhra with Isuzu and Kia are other automotive manufacturing regions around the country. In April-March 2020, overall automobile exports registered a growth of 2.95%.

Important Milestones

  • World's largest tractor manufacturer and second largest bus manufacturer

  • World’s largest two-wheeler and three-wheeler manufacturer

  • World’s third largest heavy truck manufacturer and fourth largest car manufacturer

  • The government has set up a 22-member inter-ministerial committee in strengthening the Capital Goods(CG) Sector through interventions that help the CG Sector.

  • Out of 26.36 mn vehicles manufactured in FY 2019-20, India has exported 4.77 mn.

  • The FDI equity inflow received by the Automobile Industry in FY 2019-20 is valued at USD 2.82 Bn.

7.1% 35 mn Share in India's GDP Employment generated

40% 4.3% Share in global R&D Share in India's exports


Policies and Support

  • Productivity Linked Incentive Schemes (PLI)

The Union Cabinet chaired by the Prime Minister has given its approval to introduce the Production-Linked Incentive (PLI) Scheme in the Automobile and Auto Components sectors for Enhancing India’s Manufacturing Capabilities and Enhancing Exports – Atmanirbhar Bharat.

  • Scheme Outlay - INR 57,042 cr

  • Ministry - Ministry of Heavy Industries & Public Enterprises

  • Products -

  • Automobile

  • Auto Components

  • FDI Policy

  • Under the automatic route, 100% Foreign Direct Investment (FDI) is permitted along with full delicensing. Hence, making it easy for investors to set up their manufacturing plant/shop in India.

  • The cumulative FDI equity inflow in the Automobile industry is USD 25,848.13 mn during the period of April 2000 to March 2021. This constitutes 4.88% of the total FDI inflow received across sectors. - Automotive Mission Plan 2016-26 (AMP 2026)

  • The Automotive Mission Plan 2016-26 (AMP 2026) outlines the trajectory of growth of the automotive ecosystem in India, including the glide path of definite regulations and policies that govern research, design, technology, testing, manufacturing, import/ export, sale, use, repair, and recycling of automotive vehicles, components and services.

  • The Automobile industry is projected to be the third-largest in the world, contributing 12% to GDP.

  • The industry has the potential to generate USD 300 bn revenue and 65 mn additional jobs by 2026.21

  • The Automobile industry is one of the prime movers of the manufacturing sector and the “Make in India” initiative. It aims to increase exports of vehicles by five times. The growth of vehicles, particularly passenger vehicles, is expected to triple to 9.4 mn units per annum by 2026.

  • The plan also foresees India to be the first in the world in the production/sale of small cars, two-wheelers, three-wheelers, tractors and buses; and third in passenger vehicles and heavy trucks.

  • NATIONAL ELECTRIC MOBILITY MISSION PLAN 2020 (NEMMP)

  • The NEMMP initiative has been taken up to encourage consistent, affordable and competent xEVs (hybrid and electric vehicles) that meet consumer performance and price expectations through government-industry collaboration.

  • Promotion and development of indigenous manufacturing capabilities, required infrastructure, consumer awareness and technology are additional objectives of NEMMP 2020.

  • India is expected to emerge as a leader in the two-wheeler and four-wheeler xEV market in the world by 2020. The total xEV sales projected as 6-7 mn units, thus, enabling the Automobile industry to achieve global xEV manufacturing leadership and contributing towards national fuel security.

  • The aim is to have 6 mn electric & hybrid vehicles per year on the road by 2020 under NEMMP 2020. A cumulative cost of USD 2.15 Bn is estimated for this paradigm initiative, which also includes industry collaboration.

Future Prospects

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. 16.16-18.18 trillion (US$ 251.4-282.8 billion) by 2026.

The Indian auto industry is expected to record strong growth in 2021-22, post recovering from effects of COVID-19 pandemic. Electric vehicles, especially two-wheelers, are likely to witness positive sales in 2021-22.

A study by CEEW Centre for Energy Finance recognised US$ 206 billion opportunity for electric vehicles in India by 2030



52 views0 comments

Recent Posts

See All