New Delhi: It’s important for any industry to adapt and innovate in this ever- evolving world with various enroute challenges to continue to be successful. Despite the Covid-19-induced slump and recent supply chain snarls, the Indian automotive industry has registered rapid growth by adopting advanced technologies and trends to meet the changing needs and preferences of consumers.
Significant technological advancements in electric vehicles, autonomous driving, connectivity, embracing digital sales, expanding the used-car market and intense focus on safety measures are redefining the industry’s growth momentum and in turn transforming both urban and rural transportation. They are expected to have a major impact on the automotive sector in the coming years. Currently, India is the third-largest automotive market in the world and it is projected that growth in the Indian automotive market will continue for the next decade.
The Indian automobile industry is a key contributor to the country’s economic growth. It adds 7.5% to the overall GDP and 49% to India’s manufacturing GDP. Interestingly, amid the challenging circumstances, the Indian auto parts industry witnessed a remarkable 23% growth, contributing 2.3% to India’s GDP. Estimates claim that by 2026, the autoparts exports business alone is likely to contribute about 7% to India’s GDP.
EVs set to drive the industry
Since India depends heavily on fossil fuels-based energy, EV adoption is especially important for our country’s economy and its growth prospects. The acceptance and development of the EV industry have received significant attention from the Indian government over the last several years, and this is manifest in the widespread use of electric vehicles. The governments, both at the central and state levels, are providing strategic policy support for achieving majority EV penetration by 2030 via programmes like FAME, PLI, Tax Incentives (direct and indirect), tariffs, etc.
If India continues to make steady progress towards achieving its ambitious 2030 objective, the EV market in India will provide a USD 206 billion potential by 2030, according to an independent assessment by CEEW Centre for Energy Finance (CEEW-CEF). According to another report by the India Energy Storage Alliance (IESA), the Indian EV market will expand at a CAGR of 36% until 2026. The market for EV batteries is also anticipated to expand at a CAGR of 30% over the same period. Overall, the EV sector is expected to generate 50 million indirect jobs and 10 million direct jobs by 2030. (IVCA-EY-Induslaw report).
Role of disruptive technologies
Modern technologies like the Internet of Things (IoT), Artificial Intelligence (AI), and Machine Learning (ML), among others, will aid advanced driving assistance, communication with other vehicles, avoiding traffic, as well as preventing accidents. With an expected growth rate of 10.4% between 2021 and 2031, data and telematics are expected to play a significant role in modernization and optimizing fleets. The adoption of 5G technology will be a game changer as it will enable wireless information interchange, including weather and traffic updates while driving.
Safety becomes a new normal
According to a recent analysis by the Ministry of Road Transport and Highways (MoRTH), the number of road accident fatalities in India in 2021 was 1,53,972, which would be a record high since 2011. The government, through MoRTH, established the National Road Safety Policy, which has made road safety an essential component of the entire road planning process. Additionally, automakers are collaborating to create a clear roadmap for the development of vital safety features that make vehicles safer.
In India, about 52% of buyers are willing to pay more for safety measures. While adding six airbags is the initial move in this direction, crash test ratings and other cutting-edge safety measures are also being offered to ensure safe design standards. This undoubtedly is raising consumer awareness among Indians. For the industry to prosper, the policies need to keep up with technological changes.
Growth drivers and opportunities
The Indian automotive market is poised to reach a capex of about USD 3 billion in 2023, representing a year-over-year growth of 24%. This growth is attributed to factors such as preference to personal mobility, clear and accessible financing options, improving road infrastructure and the rising popularity of electric vehicles.
Besides, automotive companies are looking at ways to make the car buying process easier by introducing virtual showrooms, which to a large extent streamline sales, reduce infrastructure and overhead costs, allowing retailers to offer competitive pricing and promotions. This provides customers with the convenience of purchasing a car through online platforms following virtual tours, submitting paperwork online, and finally receiving the car delivered at home through secure payment methods.
The emerging trends and the use of modern technologies in the automotive sector have opened up huge investment opportunities. The government’s schemes in the automobile and auto component sectors as well as financial initiatives to support manufacturing are not only boosting local market prospects but also attracting investments.
(Disclaimer: Nirmal K. Minda is the Chairman & Managing Director of Uno Minda. Views are personal.)
