How the automobile industry is changing in India

India is expected to have the world’s third-largest, passenger-vehicle market by 2021. With policies such as the Automotive Mission Plan and the National Electric Mobility Mission Plan (NEMMP), the government aims to achieve two objectives:

1. Facilitate growth in the industry so India becomes a manufacturing hub
2. Reduce automobile emissions and oil dependency

The Automotive Mission Plan 2026 aims to “promote safe, efficient and comfortable mobility for every person in the country,” while increasing the net exports of the industry. To this end, the government set targets to triple industry incomes, to $300 billion, and expand exports sevenfold, to $80 billion.

To reach these goals, the automobile sector is likely to offer more than 60 million additional direct and indirect jobs to advance manufacturing competitiveness in the field.

In terms of emissions, the administration plans to create policies that are on par with global standards, allowing India to leapfrog from BS-4 to BS-6 emanations (the Euro 6 equivalent) by 2020. Additionally, India has executed “Corporate Average Fuel Efficiency” standards, which means automobile manufacturers must increase their fuel efficiency by 10 percent by 2021 and by 30 percent by 2022.

To deal with pollution from older vehicles, the government is working on automobile end-of-life or scrappage policies. It plans to offer incentives to companies that are compliant with these new automobile standards.

Electrification is also just developing in India’s transportation sectors. Factors, such as the decreasing costs of batteries and supportive policies from the government, are certainly positive and spurring sector growth. In 2017, only 2,352 units of electric vehicles (EVS) were sold in the country. More recently, 10,000 EVs were requested by the government’s energy-service company, Energy Efficiency Services Limited — a sure sign of India’s commitment to change.

Likewise, local authorities in 10 Indian cities, with populations of one million or more personages, have placed orders for 390 electric buses through phase one. In the next step, the order book is expected to include 1,000 e-buses.

NEMMP is also a step forward. Essentially, it serves as a roadmap for the faster adoption of EVs and related manufacturing advancement in the country. India is promoting the adoption of alternative fuels within FAME2, which is an extension of the initial FAME (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles) leadership. Where FAME1 awarded incentives to EV and hybrid customers, FAME2 is expected to incentivize electrification of the public transport line of buses and taxis, as well as facilitate demand for all types of alternative combustible.

A more costly goods and services tax of 12 percent is also now applied to battery-electric transportations, compared with 31 to 48 percent for other vehicles.

The government’s “Make in India” initiative has also played an essential function in elevating the country’s position on the global manufacturing index (it currently ranks 30^th). Although there is a long way to go before India becomes a leader in automobile manufacturing, companies in the sector are beginning to view the country as a hub for low-cost, high-quality products.

After building a strong value proposition in mini cars, India is also gaining global attention in the compact sedan and SUV category.

The global automotive industry is experiencing changes that will reshape it in many ways and India will be no exception to this. Expect innovation that will affect global emissions, vehicle costs, manufacturing jobs, and the economy (and hopefully for the better in India).