India: Muted market growth and jump to BS-VI regulation

New OEMs and government promotion of electrification



  In India, the automotive industry contributes 7.1% to the nation's total GDP and provides direct and indirect employment to about 37 million people. The industry's turnover accounts for almost half of the manufacturing GDP and contributes 11% of the GST (Goods and Services Tax) revenues of the country.

  In 2018, India became the world's fourth largest vehicle market. In terms of production volume, India is the world's third largest heavy truck manufacturer, fourth largest car manufacturer, largest tractor, two-wheeler and three-wheeler manufacturer, and the second largest bus manufacturer. The government of India foresees that the country will surpass Japan to become the world's third largest vehicle market after China and the U.S. in 2020.


Muted market growth in FY 2018-19

  In fiscal year 2018-19, auto sales started on a high note, but after the first quarter (April - June 2018) sales started to deteriorate and in most of the ensuing months declined by a few percent due to the liquidity crunch, uneven monsoon rainfall, increased insurance costs, higher fuel costs, new emission norms, governmental policy uncertainties, and the growing influence of shared mobility in the country. The deterioration trend is accelerating in current fiscal year (2019-20) due to elections, liquidity tightness, disbursements from non-banking finance companies (NBFCs), and delayed and deficient monsoon season rainfall.

  Fiscal year 2018-19 also saw the transition of the automotive industry towards BS-VI emission regulations. On April 1, 2020, India will adopt these norms, skipping the BS-V stage. OEMs and automotive component manufacturers have to invest and re-engineer vehicle models to be compliant with the new BS-VI norms. The transition will increase the cost of production for the OEMs, which in turn will make vehicle selling prices costlier for consumers.

  On August 23, 2019, the Finance Minister of India rolled out several measures to boost the auto sector. Addressing the confusion of BS-IV vehicles validity, the government announced that BS-IV vehicles purchased before March 31, 2020 will remain operational for the entire period of their registration. To boost demand, the government will also lift the ban imposed on government departments to purchase new vehicles to replace old vehicles. In addition, the government is considering its scrappage policy and revision of GST.

Vehicle production, domestic sales, and exports for India Indian passenger vehicle sales by segment
Vehicle production, domestic sales, and exports for India Indian passenger vehicle sales by segment

(Source: Created by MarkLines using information provided by various announcements and sources)


Electrification and mobility

  In fiscal year 2018-19, the government of India initiated Phase-II of the FAME India Scheme (Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India). The scheme has a planned total outlay of INR 100 billion over a period of three years. With greater emphasis on providing affordable and environmentally friendly public transportation options for the masses, the scheme will be applicable mainly to vehicles used for public transport or those registered for commercial purposes.

  With the announcement of India's FAME-II Scheme and other rational announcements by the government of India, OEMs and automotive component suppliers are gearing up to manufacture electric vehicles and EV components, and government entities and private firms are announcing plans to develop EV infrastructure.

  India entered the era of connected mobility with the launch of the MG Hector and Hyundai Venue. Major OEMs such as Mahindra, Volkswagen, and Hyundai have announced plans to tie up with local shared mobility providers and self-driving vehicle companies in India.


New OEMs

  Fiscal year 2018-19 also witnessed the emergence of new OEMs such as MG Motors and Kia Motors in India. PSA Group also announced its plans to enter the Indian market.

  SAIC Motor announced its plan to enter the Indian automobile market under the MG brand. In May 2019, it rolled out the first production version of its connected SUV, Hector. MG Motor also plans to introduced its global pure-electric SUV, the MG eZS, in India by December 2019.

  In June 2019, Kia Motors revealed the compact SUV Seltos in India. The production will be based at two of Kia's production facilities - in the Anantapur district, Andhra Pradesh, India, and in Gwangju, Korea. It will be launched for sale in global markets from the second half of 2019.

  In November 2018, PSA Group and AVTEC Ltd (a CK Birla Group Co.) hosted the inauguration ceremony of their greenfield plant in Hosur, Tamil Nadu. In February 2019, PSA Group announced that the Citroen brand has been chosen to enter the Indian market. Citroen will introduce a range of new models with an international scope into the Indian market.


Related reports:
Future Mobility Show 2019: Clean and sustainable future mobility for India (Mar. 2019)
National Auto Policy: overall development of Indian auto industry (Jan. 2019)
Review of Electric Vehicles and the EV Ecosystem in India (Aug. 2018)
India: Vehicle sales grow to 3.76 million units; electrified vehicle adoption policy introduced (Mar. 2018)