India: Vehicle sales grow to 3.76 million units; electrified vehicle adoption policy introduced
Country projected to become the world's third vehicle market in 2020
In India, the automotive industry contributes 7.1% to the total GDP and provides direct and indirect employment to about 32 million people. The industry has grown thanks to strong domestic demand and supportive government policies. India is the world's fifth largest vehicle manufacturer and fourth largest vehicle market. The government of India foresees that the country will surpass Japan to be the world's third vehicle market after China and the US in 2020.
Prime Minister Narendra Modi, who took office in May 2014, has been promoting the manufacturing industry under the "Make in India" initiative to create employment and increase exports. In July 2017 the government introduced a Goods and Services Tax (GST) that is applicable throughout the country. GST replaced numerous indirect taxes with different tax rates depending on the state, which sometimes impeded foreign investment. The implementation of GST was expected to create a unified market. However, OEMs are suffering from inconsistent policies including raising compensation tax rates on mid- and large-size cars and SUVs after the GST was introduced.
As for policies to promote the adoption of electric vehicles, the government startled many OEMs by announcing in March 2017 that it plans for all new vehicle sales in the country to be electric vehicles by 2030. Since electric vehicles accounted for only 0.02% of the Indian vehicle market during the period April 2017-January 2018, a number of observers are skeptical about the feasibility of this target. Suzuki and Toyota criticized the government's plan to treat only electric vehicles favorably when hybrids are also important green vehicles. According to a report released in December 2017, the Society of Indian Automobile Manufacturers (SIAM) predicts that around 40% of new vehicle sales will be electric vehicles by 2030. In February 2018, some Indian papers reported that the government dropped its plan to push sales of electric vehicles only by 2030. The government was reported to announce that it would not formulate a separate policy to promote electric vehicles but prepare action plans instead.
The automotive industry is expected to grow in India, which has the world's second largest population of 1.2 billion people, half of which are 25 years old or younger. Many existing OEMs are planning to ramp up production and some new automakers intend to join the Indian market. Suzuki, the largest passenger carmaker in India, built its third plant in Gujarat and will increase its total production capacity to two million units in 2019. Kia Motors, a unit of the Hyundai Motor Group, will enter the Indian market upon starting operations at its first plant in the country in 2019. SAIC Motor has a plan to begin manufacturing its MG brand vehicles in India in 2019. PSA will reenter the Indian market by 2020 through joint ventures established with CK Birla, an Indian conglomerate.
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