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Indian Auto Industry – Emerging Ahead

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Economically, India’s automotive industry is well-positioned for growth. And why not? India represents one of the world’s largest car markets. Close to 20 million people are employed by the auto industry, either directly or indirectly.

The Indian automotive industry has made huge progresses and has witnessed the entry of several new manufacturers, thus replacing the monopoly of a few manufacturers which dominated the market till a few years ago.

As compared to the last decade, the Indian market is swarming with cars. And gone are the days when cars were an unaffordable commodity. In any price range, new car buyers are often intimidated by the choices in the market. Easy availability of finance, increasing disposable income and increase in India’s working-age population are encouraging the middle class population to choose from the vast range of passenger vehicles available in the market.

The enhanced competition in auto companies has not only resulted in multiple choices for Indian consumers at competitive costs, but have also ensured a remarkable improvement in the industry's productivity, which is one of the highest in Indian manufacturing sector.

For all these reasons, the Indian auto industry is flourishing and has emerged as a major contributor to India’s gross domestic product (GDP). Statistics show that the auto industry accounts for almost 7 to 8% of the country’s GDP. With the government’s backing and special focus on exports of small cars, multi-utility vehicles (MUVs), two and three wheelers and auto components, the automotive sector’s contribution to the GDP is expected to double 2016 as per the Automotive Mission Plan (AMP) 2006–2016.

According to data from the Society of Indian Automobile Manufacturers, vehicle sales have increased in 2014 by 4.1% when compared to the corresponding period in 2013; vehicles comprising of passenger vehicles, commercial vehicles, three wheelers and two wheelers.

The automotive industry was facing a few pressing challenges in the past two fiscal years. Sales in the Indian automotive sector had seen a slump for more than a year and the passenger vehicle sales in India shrunk by 6% in 2013-14 and by 6.69% in 2012-2013, probably the first biggest decline in a decade.

After a long period of slump, around mid-2014, the India’s car industry is slowly returning to growth. In May 2014, car sales in India grew 3.08%, riding on the success of a new government in the center. Another factor that added to the positive outcome was the lowering of the excise duty in the Interim Budget.

As a result most car companies saw an increase in car sales in May and there has been an increase in retail deliveries.

Maruti Suzuki, Hyundai, Honda and Toyota saw their sales increase by 16.4 percent, 12.8 percent, 18 percent and 18 percent, respectively, compared with the May 2013 figures. Ford India saw a 51 percent jump in sales from April. However, India’s fourth largest car company, Mahindra, saw its sales fall from 22,244 to 18,085 units year-on-year, a decrease of 19 percent, following heavier taxes on its sports utility vehicles. The Indian operations of General Motors also suffered last month, seeing a 43 percent drop in sales from April to May.

An increase in the number of car sales in India has prompted car manufacturers to line up new launches and has raised hopes of a long-awaited turnaround for the industry.

The 2014 Auto Expo had seen a swarm of new vehicles which were either unveiled or launched. Maruti will soon be launching its new Sx4 S-CROSS, while Honda’s Mobilio minivan has been lined up for July. Hyundai is also considering launching its next generation i20 hatchback in India. In addition, Tata Motors will launch its new Bolt hatchback and Zest compact sedan later this year. Sales have been helped by a series of new launches as dealers stock up on new models, including the Celerio hatchback from Maruti Suzuki, the market leader by sales, and the City saloon from Honda of Japan. Several automotive companies have also announced their intention to open new factories and showrooms.

The Indian auto scene is not only meeting the growing domestic demands, but is also gradually increasing its superiority in the international markets. Indian automotive industry has surely a distinct edge over the newly emerging automotive destinations of the world.

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