by Soumik Ghosh

How Indian Auto Kick Starts 2016

Jan 27, 2016
BudgetingBusinessCar Tech

The Indian automotive industry, emerging from a drawn-out hibernation, is well poised to become the third largest by 2016.

As we ride into a new sunrise, the road ahead becomes clearer. Glancing at the rear-view mirror, we see the Indian automotive industry tottering on the edge over the last four years. But that’s about to change, and how.

A sluggish global economy, coupled with declining consumer confidence, infrastructure bottlenecks, and policy stagnation translated into dismal sales figures across most markets.

Sadly, this slump masked many notable industry advancements like improved quality and safety standards without a corresponding price hike.

Cost of electronics and software used in automobiles is less than a fifth of what it was 10 years ago. In fact, electronic systems account for over 90 percent of innovations in automobiles today.

The Indian automotive industry stands at an impressive $74 billion today. The industry is well poised to take the spot as the third largest auto market by 2016. In an interview with ET, Cyrus Mistry, Chairman, Tata Motors said that the industry is expected to recover gradually during 2016.

What Grinds Our Gears

India currently enjoys being the second largest market for two-wheelers, and the third largest for small cars. There are various factors that contribute to India’s growing automobile sales. Easy availability of financing options, poor public transport, a favorable duty structure, and a rising family income have contributed heavily towards the growth of the Indian auto market. In addition to this, a key factor has been average age of the Indian car buyer hover below 33.

The Indian government has introduced Corporate Average Fuel Consumption (CAFC) standards, which mandates a 14 percent increase in mileage for passenger cars in 2016. Additionally, this figure is mandated to achieve 38 percent increase in mileage by 2021-22.

Considering the current average fuel consumption to be 16 km/liter, passenger vehicles will have to deliver over 18.2 km/liter from 2016 onward.

So, it’s elementary, my dear Watson – This mandate could compel manufacturers to sway away from focusing on SUVs or fuel-guzzling sedans.

Currently, our country has the world’s 12th largest number of high net-worth individuals, with a growth of 20.8 percent, the highest among the top 12 countries.

According to PWC, the passenger vehicle segment of India will be about 5 million vehicles by 2017-18, crossing the likes of countries like Japan. Indian auto exports are expected to grow to $17.64 billion during 2016, that’s a triple of what it was in 2010.