Factors Affecting Automobile Industry in India
Facts about the automobile industry in India
The automobile industry in India is one of the most important industries and it contributes at least 22 % towards the country’s GDP. This industry has grown over the years leading to India being ranked at 7th place in the world for production of automobiles. It is estimated that India produces a total of 17.5 million vehicles every year, 2.3 million of which are exported to other markets. This figure is expected to double with certain government interventions.
Five factors affecting the automobile industry in India
There are several factors that have affected the automobile industry in India. These include:
- Market size. India’s automobile industry has grown largely because of its large market size. The industry has had its fair share of both local and foreign consumers leading to higher production levels. The domestic market has experienced huge sales in two-wheeler vehicles with an estimated 11.3% growth recorded between April 2013 and 2014. There is also a huge market for passenger car sales within the domestic market. The sales for utility vehicles during this period were higher amongst the foreign consumers with a 298% increase in exports of these vehicles. The growing domestic income is expected to make motor vehicles more affordable for local consumers and thus increase the domestic market size for India’s automobile industry.
- Government regulations. The automobile industry in India has received extensive government support and this
has encouraged a lot of foreign direct investment in the industry. The government permits 100% foreign direct investment in this industry and it is fully delicensed making it easy for investors to penetrate it and set up shop in India. Additionally, there are also tax incentives and investors can actually export the automobiles for free. - Research and Development. There have been many research and development initiatives, both private and governmental. These are aimed at improving the automobile industry in India. The government started the Automotive Component Manufacturers Association of India (ACMA) which is an apex body that deals with the automobile industry in India. This body looks into matters such as upgrading of technology in the industry, collecting information on industrial events and trends as well as disseminating this information to relevant stakeholders. The body does this through research and also promotes trade in both domestic and foreign circles. On their part, private investors have also set up research and development initiatives within their companies. For instance the Mahindra and Mahindra research centre for electric vehicles in order to enhance their services in India.
- There are many investors from all over the world who are part of the automobile industry in India. This has created competition amongst several renowned brands of automobiles. The competition has in turn led to economies of scale with most companies working hard to meet the demands of both domestic and foreign consumers.
- Stable economy. Many experts predict that the future of the automobile industry in India is bright. However this is subject to the economic stability of the country and currency inflation rates. Economic stability and low inflation will increase incomes for majority of Indians and raise the domestic consumption of automobiles in the country.
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