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Complete Analysis on Indian Automotive Industry in 2019

The Indian Automotive industry is one of the largest in the world and has grown exponentially in the last few years. Car manufacturers in India, in particular, have experienced tremendous growth and FY’18 turned out to be one of the best in terms of sales.

The Indian Automotive Industry has been experiencing double-digit growth for the last two Fiscal Years. Having grown by leaps and bounds, it has managed to surpass Germany as the fourth largest Automotive Industry in the world. It is right behind China, the US and Japan currently.

The Indian Automotive Industry has registered a growth rate of 9.2% during the previous Fiscal Year. Its sales have risen extensively reaching up to 4.02 million units. A large portion of sales is consumed by the sale of commercial and passenger vehicles.

FY’18 was a landmark year in the Indian Automotive Industry. Building on the momentum that the industry has gains from the previous years, the sales have increased as extensively as this for the first time since 2012. One of the major reasons for this as stated by the experts has been a significant improvement in the rural economy and the after-impact of demonetisation:

●    During the FY’18, passenger vehicle market experienced a growth rate of 7.89% with sales of about 3.28 million units. Utility vehicles constituted a large proportion of the sales of passenger vehicles while passenger cars and vans also observed tremendous growth.

●    For commercial vehicles too, the total sales grew by about 19.4%. In commercial vehicles, the growth was more intense in the Medium and Heavy Commercial Vehicles Segment.

As far as the Indian Automotive Industry’s dominance is concerned, it’s the two-wheeler’s segment which is growing significantly. Besides production and sales, India is also emerging as a strong exporter. Exports by the Indian Automotive Industry grew at about 20% during the last Fiscal Year.

Indian Automotive Industry is expected to grow at a CAGR of 3.05% owing to rising demand and consistent technological developments. Moreover, it is expected to surpass the world leader, the USA by 2022.

The recent success of the industry can be attributed to domestic growth and production. Domestic automobile production rose at a CAGR of 7.08 from the Fiscal Year 13 to 18. In fact, over 29.07 million vehicles were produced during the FY’18. The sales have also risen considerably, especially in the commercial vehicle segment, where the sales rose by over 31%

As Indian Automotive Industry is growing exponentially in the production and sale of two-wheelers, around 1 million premium motorbikes were sold in the last year. In fact, the sale of expensive four-wheelers like BMW grew by 11%. This hints at a tremendous potential for the future.

Below are some of the factors that are going to help the Indian Automotive Industry and allow it to reach different heights:

●    The middle-class income is persistently rising.

●    A significant rise in the young population.

●    As India is most likely to become a leader in shared mobility in the next decade, the market for electric and autonomous vehicles is expected to rise.

●    FDI inflow in the last 19 Fiscal Years stands at US$ 19.29 billion which is a great sign for the industry.

●    India also offers cost-advantage to attract investments.

●    The government also aims to make India a world leader in this industry. Its policies and support are helping the industry immensely.

As mentioned above, FDI of US$19.29 billion was witnessed in the last 19 years. Besides that, investment by various market players is also helping the Industry:

●    Capital expenditure of US$ 155.20 million has been planned by Ashok Leyland to launch over 20 new models of commercial vehicles in the next couple of years.

●    Hyundai and SAIC motors have announced investments of US$ 1 billion and US$ 310 million in India.

●    Mercedes Benz has expanded the production capacity of its Chakan Plant to 20,000 units every year.

As the Indian Automotive Industry is showing tremendous potential, it's backed by several government policies as well:

●    The Indian government is planning to set up various Research and Development institutes and has kept a budget of US$ 388.5 for the same.

●    The government has also shortlisted 11 cities for the introduction of Electric Vehicles in their public transportation system.

●    The government also has plans to establish several incubation centres for start-ups working in this field.

With various favourable factors such as low-cost skilled labour, a large number of Research and Development centres and low-cost steel production, the Indian Automotive Industry is definitely expected to become a world leader very soon. The industry also offers wonderful investment opportunities for both direct and indirect investments. In fact, employment opportunities for both skilled and unskilled labour force are immense.

The Industry will be worth about US$ 16-18 trillion by 2026. All this while, the two-wheelers segment will grow at the highest rate.

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