The automobile sector of India is one of the largest in the world and accounts for over 7.1 per cent of India’s GDP. It also contributes to nearly 22 per cent of the nation’s manufacturing GDP. The sector was first opened to foreign direct investment (FDI) in the year 1991 amid the liberalization of the Indian economy and has come a long way since.
The industry produced a total of 23.96 million vehicles in April-March 2015, registering a growth of 2.58 per cent over the same period last year. The country is also currently the 6th largest market in the world for automobiles and is expected to become the world's third-biggest car market by the year 2020. As per the Automotive Components Manufacturers Association of India (ACMA), the world standings for the Indian automobile sector are as follows:
• Largest tractor manufacturer
• 2nd largest two wheeler manufacturer
• 2nd largest bus manufacturer
• 5th largest heavy truck manufacturer
• 6th largest car manufacturer
• 8th largest commercial vehicle manufacture
REASONS TO INVEST
· By 2020, India is expected to be the third largest automotive market by volume in the world. Tractor sales in the country are expected to grow at Compound Annual Growth Rate (CAGR) of 8-9% in the next five years, enhancing India's market potential for international brands.
· Two-wheeler production has grown from 8.5 million units annually to 15.9 million units in the last seven years. Significant opportunities exist in rural markets.
· The emergence of large automotive clusters in the country: Delhi-Gurgaon-Faridabad in the north, Mumbai-Pune-Nashik-Aurangabad in the west, Chennai- Bengaluru-Hosur in the south and Jamshedpur-Kolkata in the east.
· Global car majors have been ramping up investments in India to cater to growing domestic demand. These manufacturers plan to leverage India's competitive advantage to set up export-oriented production hubs. A Research & Development (R&D) hub: strong support from the government in the setting up of National Automotive Testing and R&D Infrastructure Project (NATRiP) centers. Private players such as Hyundai, Suzuki, and General Motors are keen to set up an R&D base in India.
· Electric cars are likely to be a sizeable market segment in the coming decade.
FDI POLICY
100 per cent Foreign Direct investment (FDI) is allowed under the automatic route in the auto sector, subject to all the applicable regulations and laws.
India is fast on its way to becoming the primary global automobile manufacturer. The government of India is more than willing to lead this charge and assist this sector in every way to help it achieve its full potential.
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