Guest author: Vasan Ramasubramaniyam | Managing Director & CEO | Prettl India Pvt. Ltd.

The Automotive Industry is the key driver of any growing economy, due to its deep forward and backward connections with almost every segment of the economy; the industry has a strong and positive multiplier effect and thus propels progress of a nation. It comprises of the Automotive and the Auto Component sectors. It includes Passenger Cars; light, medium and heavy Commercial vehicles; multi‐utility vehicles such as Jeeps, Scooters, Motorcycles, Three wheelers, Tractors, etc; and auto components like Engine parts, Drive and transmission parts, Suspension and Electricals, etc. The Indian Automotive Industry has made rapid strides since de‐licensing and opening up of the sector in 1991. It has witnessed the entry of several new manufacturers with the state‐of‐art technology, thus replacing the monopoly of few manufacturers.

The norms for foreign investment and import of technology have also been liberalized over the years for manufactures of vehicles. At present, 100% foreign direct investment (FDI) is permissible under the automatic route in this sector, including passenger car segment. Overall, the Indian Automobile Industry has shown marginal growth in FY 2012‐13 compare to last FY 2011‐12. According to Autobei Consulting Group (ACG), production and domestic sales registered a growth of 1.20% and 2.61%, respectively. However, the export`s growth is negative due to negative global environment and fluctuation.

One of the hot spots in the Automotive Industry worldwide is the Indian car market. However, Indian car industry is going through turbulent times now. Carsales is down by more than 6% in FY 2012‐13 compare to last year of FY 2011‐12. The main reasons for the negative growth are high interest rates, fuel price, high inflation, low movement in other sectors etc. Utility vehicle segment is having maximum growth in this segment. Over the last years, there is upward trend in the sales mainly due to much needed relief from Government’s liberal policies in the industry sector.

The overall Production stood at 1,935,311 units in January 2014, marking 2% increase as compared to January 2013. The domestic sales for January 2014 grew by 3.8% as against January 2013. Export for January 2014 were 247,261 units which registered 8% growth against the previous year.


Two Wheeler Sales grew by 9% in January 2014 against January 2013. Passenger Vehicle sales declined by 9% in January 2014 against January 2013. Commercial Vehicles recorded 19% sales decline for January 2014 against January 2013. Three Wheeler’s sales shrunk by 11% in January 2014 against January 2013.

Looking at the forecast on Automobile sales, as was released by central statistics Bureau, an optimistic climate is prevailing in the Auto Industry. The Industry hopes for a more favourable Union Budget 2016- 17, which should bring around revival and turnaround.


If we consider the economical key indicator in India, the manufacturing industry has a significant role .The manufacturing is primarily dominated by Auto and Auto Component Industry.


Ministry of Statistics & Programme Implementation

Emission norms will be enforced both in the 4- wheeler and 2- wheeler. Bharat stage 4 will have to be in place by 2020 and stage 3 for 2017 and ff. in respect of 2 wheeler. Based on the cc capacity of the engines at least 30 to 35 % of the 18 Mio vehicles will have to move towards the emission regulations. ABS in 2 wheelers will also be pre requisite for higher cc engine.

Many leading manufacturers are already preparing for these concepts in their new models. Required technology such EFI (Electronic Fuel Injection System) with EMS (Engine Management System) controlled through ECUs will be on the future releasing models of 2 wheeler industry.

The Four wheeler industry is also gearing up for stricter Emission Norm compliances. Technology towards treating of exhaust gas with Sintered Metal filter (SMF) along with catalytic converters (SCR) or to comply with the next level of emission norms (Euro V) with SCRT system (with addition of adBlue) will be necessary to reach Bharath Stage 4/5. These technology products can be used as retro-fitment in all existing on road vehicles.

The Government of India, in particular, the Ministry of Industry and Ministry of Renewable energy has been setting up many incentives and single window concepts in respect of the Auto and Auto Component Industry for any FDI on the technology to contain the emission and to ensure safety on road. The Government has made investments to develop Smart cities which will focus, apart from using renewable sources of energy, on the enforcement of emission norms. Many Auto Giants have already planned on the anvil to develop EVs for these smart cities and this will create good demand for the manufacturing of technology-driven components. Make in India will be most favoured by Central and state governments. Special Economic Zones (SEZ) are set up by the government in order to provide many incentives – tax holidays, reduced Import duty on Capex that supports the above focus areas etc.

This is the time for Global Auto/ Auto Component manufactures to look out for a Greener pastures in India. With much lower cost of manufacturing and combined with adequate skilled labour and with more liberal Government policies for more soaps in the upcoming budget, the time for investments cannot be more favorable than this.

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