The Banyan Tree : automobile industries in india, foreign investment in indian automobile industry, indian business opportunity
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Overview->Growth Sector-> Automobile & Auto Component foreign equity participation
Indian automotive industry

The Automobile Industry performance in all its sectors has been encouraging. According to an Assocham study, the global component industry is likely to go up to about USD 1.9 trillion by 2015. Out of this USD 700 billion is expected to flow to low cost countries (LCC). This would present an enormous business opportunity for auto component manufacturers in India as tier 2 or tier 3 suppliers.
Tier 1 suppliers are looking to set up manufacturing facilities in India due to its cost advantage and the availability of skilled labour and qualified engineers.

Automatic approval has been granted to foreign equity investment upto 100% for the manufacture of automobiles and components. The Finance bill also allows a 150% weighted deduction for in-house R&D expenditure in the auto component industry.

The size of the Indian automotive industry is estimated between US$ 120.09 billion and US$ 155.12 billion by 2016. The industry is expected to touch the 10 million mark, to which the Commercial Vehicle Segment will be a major contributor. Industry experts peg the Indian Automobile sales growth at a compounded annual growth rate (CAGR) of 9.5 % by 2010.

o India in world automobile market:-

  • Two wheelers - 2nd largest in the world
  • Commercial Vehicle - 4th largest in the world
  • Passenger car- 11th largest in the world
  April 2008 April 2007 Year-on-year
April Change (%)
Commercial vehicles 33,271 30,914 7.60
Passenger cars 98,740 84,283 17.10
Multi-purpose vehicles 9,070 6,118 48.20
Utility vehicles 22,203 16,862 31.70
Two-wheelers 616,038 570,381 8.00
Scooters/scooterettes 81,002 72,369 12.00
Motorcycles/step-through 501,592 463,091 8.30
Source: Society of Indian Automobile Manufacturers

As Indian automobile sector has grown and matured, Indian auto components industry is also showing a rapid growth, with a rate of 15% to become an estimated production of US$ 10 billion. The huge demand from domestic and international auto companies has seen this sector emerging as one of the fastest growing manufacturing sectors in India and globally.

The Auto components industry is divided into five segments:

  • Engine parts
  • Drive Transmission & Steering Parts
  • Suspension & Brake Parts
  • Electrical Parts
  • Body and chassis

In 2006-07 total export from automotive component industry was USD 3 billion and as per report by ACMA this will increase to USD 5 billion in 2008-09 & in the next seven year it will touch to USD 20 billion marks. Today India's share in global auto component market is 0.3 % which will set to increase to 3-4 %.

  • Key advantages:-
    a) The country provides skilled and cheap labor.
    b) An Indian company has started working with automation so as to meet worldstandard.
    c) Due to adaptation of quality control tools like TQM, TPM etc. manufacturing cost reduced significantly.
    d) Less government obstacles for set up business in India.
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