Overview of Industry Segments Automobile Industry
Overview of industry segments Automobile industry: India’s automobile market is the largest in the world in terms of unit production for Two-wheelers, Three-wheelers and tractors. While two-wheelers and passenger vehicles dominate the domestic auto market, the passenger car segment is driven by sales of small and mid-sized cars.
Despite a slump in the auto industry, which began prior to the outbreak of COVID-19 and was aggravated by the pandemicled restrictions, it marked a strong revival in FY 2022-23, with the demand for alternate mobility and ownership as well as the emergence of new technologies and innovation in the sector. To sustain the growth momentum, the industry has been adopting many new trends such as digital sales, expanding the used-car market to increasing safety-related measures, etc.
The revival has also been driven by government support for the industry, in terms of multiple schemes rolled out in the recent past, including Auto PLI, Battery ACC and Fame II. The Scrappage Policy, which aims to phase out vehicles older than 15 years in a bid to boost clean-energy vehicles, will also give a boost to the auto industry as it will boost demand for new cars. Towards this end, the government announced a plan to scrap 9 Lakh vehicles owned by the Central and State governments and PSUs from April 1, 2023.
In FY 2022, Two-wheelers and passenger cars accounted for 77% and 18%, respectively, of the automobile market, which has developed on the back of advancements in infrastructure, the young demographic with rising incomes and access to finance for the purchase of automobiles.
According to the industry body SIAM, the industry produced a total of 2.29 Crore vehicles, including Passenger Vehicles, Commercial Vehicles, Three-Wheelers and Two-Wheelers in FY 2021-22 as against 2.26 Crore in FY 2020-21, registering a marginal growth of 1.32% compared to a degrowth of 14% between FY 2020-21 and FY 2019-20.
Automobile Industry Domestic Sales Trends
| Category | 2016-17 | 2017-18 | 2018-19 | 2019-20 | 2020-21 | 2021-22 |
| Passenger Vehicles | 30,047,582 | 3,288,581 | 3,377,389 | 2,773,519 | 2,771,457 | 3,069,499 |
| Commercial Vehicles | 714,082 | 856,916 | 1,007,311 | 717,593 | 568,559 | 716,566 |
| Three-Wheelers | 511,879 | 635,698 | 701,005 | 637,065 | 219,446 | 260,995 |
| Grand-Total | 21,863,281 | 24,981,312 | 26,266,179 | 21,545,551 | 18,620,233 | 17,513,596 |
An increase in consumer spending, acceptance of higher ground clearance and introduction of sub-4m SUVs, resulted in SUVs (>46 per cent of total PV sales) gaining popularity in the market. Congruently, many major OEMs have been offering multiple products in this segment.
The Indian used car market has been witnessing a steady rise in sales in recent times, driven by individuals in urban areas and metropolitan cities preferring to own multiple vehicles to enhance mobility and convenience. During FY 2022, 4.4 million units were sold in the Indian used-car market and during FY 2023, this figure is expected to climb to 4.6 million units according to IndianBlueBook.
As per a report by Grand View Research, the automotive industry in India is set to expand at a compound annual growth rate (CAGR) of 11.3% till 2027. Amidst the global energy crisis and continued supply-chain disruptions, the automotive industry players are exploring options to reintroduce the sector. By implementing cloud computing and electric vehicles technology, the industry is entering fast into a revolutionised age with the primary aim of offering the consumer a value-added experience.
Further, the boost to infrastructure in the Budget 2023 will provide a boost to the automobile sector as it will result in creation of good roads, amongst other infrastructure.
A relatively new and fast growing segment in the automobile industry is the Electric Vehicle (EV) segment. A jointly prepared report by KPMG and CII pointed out that the shift to EVs is no longer an uncertainty but only a question of when. Over the last couple of years, the Indian government has drafted policies and plans like the FAME, towards achieving a 30% EV sales penetration for cars, 70% for commercial vehicles and 40% for buses as well as 80% for two- and three-wheelers by 2030. The report projected that the growth in electric vehicle sales in India is likely to continue for the rest of the decade, with two and three-wheelers expected to dominate EV sales in the near future.
Read more: Powering Tomorrow: Sustenable Investing in Green Energy
Automobile Exports Trends
India’s strong engineering talent base and low-cost manufacturing expertise has made the country an attractive global manufacturing and export hub. According to IBEF, India is a major exporter of automobiles worldwide, exporting 24% of total vehicles produced as of FY 2022. Indian automobile exports comprise two-wheelers, three-wheelers, commercial vehicles and passenger cars. Various initiatives from the government for instance, Make in India, strong connectivity, availability of infrastructure and relations with key trade partners have contributed to an increase in exports over the years.
| Category | 2016-17 | 2017-18 | 2018-19 | 2019-20 | 2020-21 | 2021-22 |
| Passenger Vehicles | 0.758 | 0.748 | 0.676 | 0.662 | 0.404 | 0.577 |
| Commercial Vehicles | 0.108 | 0.096 | 0.099 | 0.06 | 0.05 | 0.092 |
| Three-Wheelers | 0.271 | 0.381 | 0.567 | 0.501 | 0.393 | 0.499 |
| Two-Wheelers | 2.340 | 2.815 | 3.280 | 3.519 | 3.282 | 4.443 |
| Grand-Total | 3.480 | 4.042 | 4.629 | 4.748 | 4.134 | 5.617 |
While domestic sales declined by close to 6% between FY 2020-21 and FY 2021-22.
IBEF reports that for April-July FY 2023, the total automobile exports stood at US$ 8.9 billion, up 25% YoY compared with US$ 7.2 billion as of April-July FY 2022. Strong demand for vehicles owing to the recovery of the economy and alleviation of supply chain-related issues helped increase exports.
To enable smaller/younger companies to raise money from the public through the capital markets, SEBI has allowed both the BSE and the NSE have separate trading platforms within the main stock exchanges, where shares of SMEs are traded. These are called SME exchanges. The founder of MSMEx – a micro advisory platform providing business advisory and consulting services – expects over 10,000 companies to list on the SME Exchange in the next five to ten years.
