Impact of India on Automotive Sector, 2021 Update – Thematic Research

Pages: 30 Published: September 30, 2021 Report Code: GDAU-TR-S036

While the auto market in India has experienced much tumult in the past few years, the fundamentals for market growth remain strong. COVID-19 and recent economic weakness has delayed the growth trajectory of the market. India’s GDP dropped 23.9% in Q2 2020 – the biggest COVID-19 induced GDP fall among the world’s large economies. At the forefront of the economic slowdown has been the automotive sector; not a single vehicle was registered or produced in India in April 2020 due to India’s social and economic lockdown.

M&A activity in the Indian automotive space is sparse at present indicating the nascent status of market development and the recent disruption that COVID-19 has brought. In global terms, the deals are much smaller in value and many reflect a cleaning up of asset and facility portfolios to better position for the future. Once the Indian market achieves a more stable footing, then the deal activity is expected to pick up. M&A activity will also be boosted by the government’s September 2021 announcement of $3.5 billion in incentives for those companies that invest at least $34 million in India’s auto sector over a five-year period.

What are the market dynamics in India’s automotive sector?

India remains the global automotive industry’s most significant volume opportunity after China. However, COVID-19 and recent economic weakness have delayed the growth trajectory of the market. Until the second half of 2021, there was a sequential and rapid recovery in vehicle registrations with SAAR touching or exceeding 4 million units from September 2020 until April 2021. Then the Delta mutation of COVID-19 hit India hard causing another wave of lockdowns and seeing SAAR drop to 1.4 million in May 2021. Thereafter the market recovered rapidly, but in August 2021 we saw the first fall out of the chip shortage in the Indian market with SAAR slipping to an estimated 3.7 million in the month.

What are the key trends impacting the automotive sector in India?

Electric vehicles

India has some of the most polluted cities in the world and is still largely dependent on coal. Following other countries that have announced the phased banning of internal combustion engine (ICE) vehicles, the Indian government has set itself the target of turning 30% of all vehicle’s electric by 2030. This target was scaled down from the original 100% as the transition to battery-powered vehicles is expected to be slow and the country still needs to build the necessary charging infrastructure to sustain it.

The FAME initiative

To assist in reaching its target of 30% of all vehicles being electric by 2030 the government introduced an incentive scheme, Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME), in 2015. FAME takes care of the consumer side of the equation by introducing incentives to reduce the purchase price of EVs and hybrids and help usher the market towards early adoption.

SUVs everywhere

The SUV is now ubiquitous on driveways and highways throughout the world. A combination of continuing low oil prices, improved fuel economy technology, a safe-feeling and ostentatious seating position, a switch to car-based platforms from old-school ladder frames.

Vehicles scrappage policy

As presented elsewhere, India’s auto industry has seen subdued sales volumes and production declines in the past few years stemming from both the macroeconomic and COVID-19 related issues. The reduction of the general sales tax (GST) on vehicles and the vehicle scrappage policy were the two main demands that automakers made to the government to revive the domestic demand. Finally, after a wait of six years, the government officially launched the vehicle scrappage policy in July 2021 which will put unfit and polluting vehicles off the Indian roads.

Covid-19 to bring A-segment rebound

Covid-19 has led many to re-evaluate personal mobility needs and move to the safety of personal transportation from public transportation.

Which are the leading automotive companies in India?

Leading automakers in India include Maruti-Suzuki, Hyundai, Kia, Tata and Mahindra while leading suppliers include Motherson, Apollo Tyres and Minda.

Market report scope

Leading Automakers Maruti-Suzuki, Hyundai, Kia, Tata and Mahindra
Leading Suppliers Motherson, Apollo Tyres and Minda
  • This report is part of GlobalData’s ecosystem of thematic investment research reports, supported by our “thematic engine”.

Table of Contents

Executive Summary

Players

Trends

Indian automotive trends

Global automotive trends

Industry analysis

Market size and growth forecasts

Mergers and acquisitions

Timeline

Companies

Sector scorecards

Further reading

Our thematic research methodology

Frequently Asked Questions

The market for light vehicles in India was 2.9 million in 2020.

Leading automakers in India include Maruti-Suzuki, Hyundai, Kia, Tata and Mahindra.

 

Leading auto-parts suppliers in India include Motherson, Apollo Tyres and Minda.

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