India’s Automotive Sector Outlook

In light of recent global pandemic leading to a worldwide economic slowdown, this article compares the automotive industry outlook in India against the global picture and analyses the trends in upcoming years. To start with let’s look at how the global automotive industry has progressed over the years. From being an object of desire to a product of need/ necessity, the automotive industry has undergone tremendous developments across products developed as well as services offered to customers. Global Automotive Industry (1990-2018) The numbers speak as to how an automobile has helped address multiple needs of individuals across all facets of society. The sales figure in the 2000s has exhibited a significant jump from thatin 1990s where industrial production was on the rise and the entire assembly operation was a tedious process overall. The onset of 21st century embraced overwhelming developments in terms of industrial production ranging from agile and lean manufacturing to automation and most recently cognitive intelligence equipped smart industries. This has led to bulk production with least quality defects, coupled with optimal service offerings to enhance the industrial outlook. Now let’s understand how things have shaped up in the Indian automobile industry over the recent decade or so. Automotive Industry – India (FY2013-FY2019) The automotive industry in particular has witnessed a constant growth primarily in the Two wheelers segment. With a right mix of budget and luxury products in the market, this segment has contributed approximately 80% to the overall industry figure. Major factors driving the incessant growth of two wheelers segment include: Rising traffic on roads resulting in two wheelers offering the quickest and most convenient option In a country with middle class surplus population, owning a budget motorbike is considered to be a safer and securedinvestment over a four-wheeler These cultural sentiments corroborate the growth rate of Two wheelers segment over other automobile segments. Growth %age calculated between 2 financial years The above chart signifies that all segments have witnessed a fluctuating growth figures with passenger vehicles segment showcasing the most abrupt growth curve. Several factors have led to the growth of passenger vehicle segment in years. These include: Strong inclination to own cars with rising middle-class income in India Presence of several low priced and budget products in market Rising number of automakers preferring to set up manufacturing units in the country Easier and multiple financing options available Despite these contributing factors and lead indicators, major Indian automakers have witnessed a constant decline in sales with the onset of FY 19-20 culminating in the COVID pandemic further slowing down activities for over 6 months in 2020. Other factors have also played a role that include, shifting consumer preference towards renting a car/ cab or carpooling. Additionally, the cab aggregator services are also on the rise with a rising number of personal and professional cab service providers. Future Outlook It is however predicted that the automotive industry shall recover from this minor slump and showcase growth in the succeeding years. Some of the developments that are expected to catapult the growth of Indian automotive industry in future include Electric vehicle production– This is subject to setting up a robust and sustainable energy infrastructure to support the demand Driverless and AI enabled automobiles – This is a rapidly emerging concept and would take at least 5-7 years to further develop and gain prominence Availability of better choice and options in terms of budget vehicles within each automotive segment The onus lies majorly on automakers to tap these developments but the responsibility to drive the growth in this sector would rest on the government. Availability of adequate infrastructure would be a lag indicator if the government fails to upgrade the current scenario.