Continuous policy liberalization in the automotive sector over the years by the Government of India has resulted in making India one of the prime business destinations for many global automotive players.
The judicious policy interventions by the Government have made the existing players to do their best and remain cost competitive and new players bringing in new products and increasing competition. This has also resulted in substantial increase in automobile capacity and generated huge employment. The auto industry currently employs more than 12.5 million people both directly and indirectly and generates employment of 13 persons for each truck, 6 persons for each car and four persons for each three wheeler and one person for two-wheelers.
The Sector has been identified as the ‘Sunrise Sector’ of the economy. The Automotive Mission Plan 2006-16, a joint document of the government and industry has projected that the industry’s turnover would increase from US$ 34 billion to US$ 145 billion, an investment of US$ 35-40 billion (Rs.160,000 -180,000 crores) and 25 million additional job would be created over a period of 10 years. The auto industry’s contribution to GDP would rise from nearly 5% to 10%, thus making it a greater driving force of the economy.
The Indian auto industry grew at 13 per cent in last five years. The production growth in various segments over last few years is as follows:
Passenger Vehicles |
1,777,583 (15.0%) |
1,838,593 (3.4%) |
2,357,411 (28.2%) |
2,987,296 (26.7%) |
17.9% |
Commercial Vehicles |
549,006 (5.6%) |
416,870 (- 24.1%) |
567,556 (36.2%) |
752,735 (32.6%) |
14.0% |
Two Wheelers |
8,026,681 (- 5.2%) |
8,419,792 (4.9%) |
10,512,903 (24.9%) |
13,376,451 (27.2%) |
11.9% |
Three Wheelers |
500,660 (- 9.9%) |
497,020 (- 0.7%) |
619,194 (24.5%) |
799,553 (29.1%) |
12.9% |
Grand Total |
10,853,930 (- 2.1%) |
11,172,275 (2.9%) |
14,057,064 (25.8%) |
17,916,035 (27.5%) |
12.9% |
Our Exports performance over last few years is as follows:
Passenger Vehicles |
218,401 (10.0%) |
335,729 (53.7%) |
446,145 (32.9%) |
453,479 (1.6%) |
20.9% |
Commercial Vehicles |
58,994 (19.1%) |
42,625 (- 27.7%) |
45,007 (5.6%) |
76,297 (69.5%) |
13.4% |
Two Wheelers |
819,713 (32.3%) |
1,004,174 (22.5%) |
1,140,058 (13.5%) |
1,539,590 (35.0%) |
24.6% |
Three Wheelers |
141,225 (- 1.9%) |
148,066 (4.8%) |
173,214 (17.0%) |
269,967 (55.9%) |
28.6% |
Grand Total |
1,238,333 (22.4%) |
1,530,594 (23.6%) |
1,804,426 (17.9%) |
2,339,333 (29.6%) |
23.7% |
The Indian automobile industry’s growth is driven by various factors which include:
Economic growth Rural economy Government duty Disposable income Infrastructure-Road Development
However, against this background of robust industry growth, the auto industry is deeply concerned about certain factors like:
High rate of excise duty on various kind of vehicles Rise in Interest rates Rise in commodity prices Low growth of Export markets High and varied rate of road taxes
Moreover, despite growth of the industry, India is still highly under penetrated. In India, there are only 10 passenger vehicles per’000 population, 4 commercial vehicles per’000 population and 43 two wheelers per’000 population. Globally, these figures are substantially higher. For instance, Germany has 565 cars per’000 population, S Korea has 238 cars per’000 population and Thailand 57 cars per’000 population. In case of Commercial vehicles, the penetration in various countries is much higher – 131 in Japan, 90 in Thailand, 88 in S Korea, etc. In two wheelers also, countries like Thailand (286), Japan (100), Germany (69), etc have much higher penetration.
In the last Union Budget, the major announcements impacting the auto sector were:
Setting up of National Mission for Hybrid and Electric Hybrid vehicles. Excise Duty on kit developed indigenously for conversion of fossil fuel vehicles into Hybrids and their parts reduced from 10% to 5%. Specified parts of Hybrid vehicles exempted from Basic Customs duty and special CVD and to attract a concessional rate of Excise duty of 5%. Concessional Excise Duty of 10% levied on vehicles based on Fuel cell or Hydrogen cell technology. Concession to factory-built ambulances in place of the existing refund-based concession from excise duty. Refund-based concession (@ 20% of excise) to taxis having a seating capacity not exceeding 13 persons including the driver CKD Definition Introduced Full exemption from Basic Customs duty and Central Excise duty of 5% to specified parts of electrical vehicles on actual-user basis extended to batteries imported by such manufacturers for the replacement market. Under the Service Tax, the scope of “authorized service station service” was expanded.
Recent Performance
Production: The cumulative production data for April-September 2011 shows production growth of 16.62 percent over same period last year. Production in September 2011 grew at 19.96 percent as compared to September 2010.
Domestic Sales: The cumulative growth rate of domestic sales recorded for April-September 2011 was 14.36 percent. September 2011 registered a growth rate of 19.39 percent as compared to September 2010.
Passenger Vehicles segment grew marginally at 1.84 percent during April-September 2011 over same period last year. Passenger Cars recorded de-growth at (-) 1.36 percent, Utility Vehicles grew by 9.84 percent and Vans grew by 19.24 percent in this period. In September 2011, Passenger Vehicles grew marginally by 1.43 percent over same period last year. Passenger Cars recorded de-growth at (-) 1.80 percent, Utility Vehicles and Vans recorded growth of 14.78 percent and 10.86 percent respectively. The overall Commercial Vehicles segment registered a growth of 17.85 percent during April-September 2011 as compared to the same period last year. While Medium & Heavy Commercial Vehicles (M&HCVs) registered growth of 6.05 percent, Light Commercial Vehicles grew at 28.72 percent. However, in the month of September 2011 over September 2010, the growth in sales of the overall segment was 18.05 percent. Three Wheelers sales recorded de-growth at (-) 0.04 percent in April-September 2011. While Passenger Carriers registered decline at (-) 3.70 percent during April-September 2011, Goods Carriers registered growth of 16.54 percent. Two Wheelers registered a growth of 17.42 percent during April-September 2011. Mopeds, Scooters and Motorcycles grew by 13.51 percent, 23.02 percent and 16.47 percent respectively. If we compare September 2011 to September 2010, the growth figures for two wheelers was 24.27 percent. Three Wheelers registered marginal growth at 0.90 percent in the month of September 2011.
Exports: During April-September 2011, overall automobile exports registered a growth rate of 32.31 percent. Passenger Vehicles registered growth at 21.01 percent in this period. Two Wheelers, Commercial Vehicles and Three Wheelers segments recorded growth of 32.34 percent, 35.91 percent and 49.55 percent respectively during April-September 2011. In September 2011 compared to September 2010, overall automobile exports registered a growth of 39.62 percent. |
