Driving Forward: The Resilient Boom in India’s Automobile Sector

January 17, 2024

Driving Forward: The Resilient Boom in India’s Automobile Sector

Join us as we navigate through the fast lanes and uncover the driving forces behind the boom in India’s automotive industry.

  • Indian passenger vehicle sales increased by 17.3% in October 2023.
  • Indian passenger vehicle sales in October 2023 (excluding BMW, Mercedes Benz, Volvo Cars and Tata) were up 17.3% y/y to 341,377 units.
  • Maruti, Mahindra and Toyota exhibited an increase of more than 20% in sales from Oct 2022.

India- New Vehicle Sales by major makers (excluding export sales)

MAKE OCT 23 OCT 22 Y-o-Y
Maruti Suzuki 171,941 143,250 20%
Tata 80,825 76,537 5.6%
Mahindra & Mahindra   68,392 52,588 30.1%
Hyundai 55,128 48,001 14.8%
Toyota 20,542 13,143 56.3%
Honda 9,400 9,543 -1.5%
Kia 24,351 23,323 4.4%

The automobile sector is one of the key pillars of  the growing economy in India, contributing to about 7% of our GDP. The industry is expected to grow at a CAGR of 8.1% in the coming years to reach a value of $160 billion in 2027. The growing success of this industry in 2023 has been making the news every month. So what has led to the boom in this sector?

  • Rising disposable incomes: India’s growing middle class and increasing disposable incomes have fueled automobile demand. As more individuals have the means to afford personal vehicles, the domestic market has witnessed a surge in sales.
  • Changing consumer preferences: With changing lifestyles, consumers seek more comfortable and feature-rich vehicles. There is a growing demand for advanced safety features, fuel efficiency, connectivity options, and innovative designs. Automakers have been quick to adapt and cater to these evolving preferences.
  • Infrastructure development: Investments in infrastructure development, such as the construction of highways, expressways, and improved road networks, have facilitated better connectivity and mobility across the country. This has further contributed to the growth of the automotive industry.
  • Make in India and Automotive Mission Plan 2026 : The Indian government, through initiatives like ‘Make in India’ (launched in 2014), is actively fostering the growth of the automotive sector. This campaign has attracted substantial investments, both domestic and international, leading to expanded production facilities and job opportunities. Additionally, the ‘Automotive Mission Plan 2026’ plays a pivotal role, outlining a strategic roadmap for the industry’s development, emphasizing areas such as R&D, skill development, technology adoption, and sustainable growth to enhance India’s global competitiveness in the automotive market.
  • Digitalisation and Advanced tech: The Indian automotive industry is adopting Industry 4.0, leveraging technologies like robotics, AI, IoT, big data analytics, and cloud computing. This digital transformation aims to streamline manufacturing processes, boost productivity, and elevate product quality.

Advancements in India’s Automotive Manufacturing Sector: The Indian automotive industry has seen significant expansion in manufacturing capabilities, with domestic and international players establishing state-of-the-art production facilities. These facilities employ advanced technologies, adhering to global quality standards.

The Power of Localized Supply Chains: Developing a robust supply chain ecosystem has also been a crucial enabler for the industry’s growth. Automotive manufacturers have collaborated with local suppliers to ensure a seamless flow of components, reducing dependency on imports and enhancing cost efficiency.

Furthermore, initiatives such as the National Automotive Testing and R&D Infrastructure Project (NATRiP) have been undertaken to strengthen the testing and research capabilities within the country. This has supported innovation, localization of technologies, and the overall growth of the automotive sector.