Automobiles and India seem to have a deep association. In the countries capital are a total of 6,151,528 registered private and commercial vehicles and the number of vehicles sold in India is continuously growing. In FY2016, the Indian Automotive industry produced a total of 19.84 million vehicles, and recorded sales of 20,469,322 units. According to estimates, India will become the 3rd largest market for automobiles by 2020, which also gives the producers of cars and other vehicles a positive business outlook. A technology currently preoccupying car manufacturers is the self-driving car. This futuristic technology may reach annual investments of $25 billion by OEMs by 2020. As for now, most of the logistic movement  of the Automotive Industry in India is handled by road transport. This situation is not optimal as road transport contributes a lot to pollution in India.

It has become critical today to know what the Indian government plans to make automotive logistics more ecological and efficient and ensure India’s competitiveness.

Contributing 7.1% to India’s GDP, the Automotive Industry plays an important role for India’s economy. The Society of Indian Automobile Manufacturers (SIAM) expects passenger car sales to grow by 6-8% in FY2016-2017. But with the demand for new cars, those new vehicles need to be transported from its production origin to the dealerships or ports. Even before a car is assembled, its components might need to be transported, as suppliers and production facilities of components are mostly not located directly next to the production facility. Logistics cost are estimated to be 14% of the GDP in India. This adds a high cost factor for manufacturers. So now, the topic to shift more auto transportation to ships and railways has arisen.

Especially for domestic transport, railways save time and are more ecological solution. Both of these transportation systems have less emission and add safety during transport in the way that they don’t have to use poorly managed roads such as trucks. Additionally, these two transportation possibilities are time-saving options.

Even though improving and developing roads and highways is an important project for the Indian Government, “alternate modes of transportation need to be explored further”, V. Dasari, president of SIAM, said at the recent Automotive Logistics Enclave. The development of these other modes, railway and shipping, is especially important as the volume of cars is expected to grow massively and road transport of cars won’t be the most reliable solution then. India already has a huge problem with pollution, which one can see in the fact that 6 out of the 15 most polluted cities of the world are located in India. On the other hand, car sharing Apps are getting more and more popular in the country and build competition to personal drivers and Taxis. Uber especially wants to increase its presence in India to be conveniently available for everyone and ensure more seats per car/ ride are occupied. With this, cars on the roads could be reduced, as nowadays, only 1.5 seats on average are occupied during a ride.

Regarding pollution, India has set the target to become the first nation with all electric cars by 2030. To ease reaching this target, a provision of zero down payment at the time of buying an electric car is being made to support the initiative. Buyers can now  pay for the car from the savings they make  by not using expensive fossil fuel. India also offers subsidies and has set aside a large amount for the development of the electric vehicle sector in its budget. Therefore, Indian and international car manufacturers are now focusing on developing electric cars which are more affordable than currently existing models. To hasten the conversion to electric cars and to curb pollution, the Government now also allows car owners to convert their old cars into hybrid electric ones. For this, it has now started certifying manufacturers and installers of electronic car kits. It also plans to give discounts on new, more fuel-efficient cars for people who voluntarily scrap their current cars.

Another way to reduce emissions could be to use more lightweight materials for cars – with every 10% reduction of the car’s gross-weight, fuel economy improves by 7%. The Government also wants to support the industry with initiatives like setting up more logistics parks, standardizing pricing, creating tariff plans & processes, and capacity building for IT and existing infrastructure de-bottlenecking.

Additionally, it would help if the government pays closer attention to railway infrastructure, as some of the railway systems are already outdated and need improvement to make transportation more efficient. The transport solutions can help India become an eco-friendlier nation and reduce its pollution problem. Furthermore, the two opportunities can help save a company logistics costs. As vehicle movement by road transportation still comprises 95% of total auto transportation, this way of transport won’t disappear for some time. But with the right investment from companies and the Government, water- and railway transportation of automobiles could emerge as leading transportation systems that also help India to become a cleaner nation.

All in all, not only other modes of auto transport help India become cleaner, also its movement towards less- and non-emitting cars will significantly help reducing the pollution in the country. Betting on new technologies will also surge India’s Automotive Industry for further growth in the future and for staying competitive.

To read more about the Indian Automotive Industry, click Automotive Industry Newsletter.