Auto industry to drive Make in India

With India emerging as one of the world’s largest auto markets — with annual sales of 19.8 million vehicles in FY15 — the auto industry is set to become the engine of the government’s ‘Make in India’ initiative, according to an EY report.

Published: February 9, 2016 3:26:05 am
ndia is also one of the fastest growing auto markets, with production of 23.4 million vehicles in FY15 and a leading position in several sub-segment. ndia is also one of the fastest growing auto markets, with production of 23.4 million vehicles in FY15 and a leading position in several sub-segment.

REASONS FOR THE FUTURE BOOST

LOW VEHICLE PENETRATION and improving economic fundamentals.
HIGHER ANNUAL SALES: India saw an annual sales of 19.8 million vehicles in FY15.
FASTER GROWTH: India is also one of the fastest growing auto markets, with production of 23.4 million vehicles in FY15 and a leading position in several sub-segment.

FACTORS ON WHICH THE GROWTH HINGES 

REGULATORY ENVIRONMENT:

A stable and supportive regulatory environment is critical to drive growth. Some key regulations:

Cleaner transport: Advancement of BS VI norms, likely rollout of the “End of life” policy, FAME-India scheme

Safer transport: Upcoming Road Transport and Safety bill, International Safety Standards from 2017

‘Make in India’ and the initiatives to improve the ease of doing business.

‘Start-Up India’ programme to help improve doing and establishing new businesses.

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GST: Implementation would lead to reduction in logistics cost, lower tax burden on vehicles, greater transparency, reduction in cost of doing business.

FDI growth: A sharp turnaround in foreign direct investment was seen in the year 2014. After declining for two successive years, investment in India has bounced back with 32% growth to $25 bn — significantly ahead of the 7 per cent growth in FDI seen all over the world.

DEVELOPING TALENT AND SKILL

Abundant labour pool and low labour costs: They are helping India attract manufacturing. Siam’s Automotive Mission Plan 2026 aims to propel the auto industry to become the engine of the “Make in India” initiative. The automotive sector is expected to create 15 million direct jobs by 2022.

50% contribution from auto components segment to the sector’s direct employment.

Skill development of the large talent pool is seen as the most critical lever.

INFRA DEVELOPMENT

Developing transport infrastructure is essential to develop India as a manufacturing hub.

Government initiatives for infrastructure development: Investment plans of $150 billion in highways and shipping by 2019. Investment plans of $140 billion to modernising railway. Investment plans of $27.1 bn for ports and shipping under 12th Five-Year Plan.

Targets for manufacturing in India including a 25% share in GDP and creating 100 million new jobs by 2022.

The R&D Push

Global players investing in R&D to tap India’s engineering base and cost advantage.

Domestic players are investing in R&D to compete at a global level.

The government is supporting a push R&D investments.

 

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