Make in India - Impact on the Auto Sector

Prime Minister Narendra Modi-led ‘Make in India’ campaign is an attempt to turn the country into a global manufacturing hub through a string of measures via enforcing easier norms and rules. Being an agrarian economy for years and demotivating complex procedures for businesses – this transformation won't be cakewalk. But through this campaign, India is (at least) trying to project a progressive environment and a renewed recognition for the nation.

The automotive industry which accounts for about 45 percent of the country's manufacturing gross domestic product (GDP) and 7.1 percent of the total GDP. The auto industry has taken the Make in India campaign positively. General Motors recently announced a $1 billion additional investment for its Indian subsidiary, Chevrolet India, while luxury carmaker BMW increased the level of localization up to 50 percent.

Also, the foreign Direct Investment (FDI) into the automobile industry has witnessed a massive 164 percent growth over the course of seven months since the inception of make in India initiative on September 25, 2014. The investment has jumped to US$2189.15 million (October 2014- April 2015) from US$ 830.69 million (October 2013- April 2014) in the industry.

India is currently the seventh largest vehicle (including 2-, 4-wheelers and CVs) producer in the world with an average annual production of 23.36 Million vehicles, of which 3.57 Million are exported. It is currently the second largest two-wheeler producer, the largest motorcycle producer and the fifth largest commercial vehicle producer in the world.

Further, the Indian auto industry is looking at a total value of vehicle-related production to reach as much as 18.9 trillion rupees ($285 Billion) by 2026, under the Automotive Mission Plan 2016-2026, a dedicated extension for the auto sector under Make in India campaign.  

A lot of carmakers have been using the Indian soil as their manufacturing hub. Hyundai is the country’s second-largest carmaker but in terms of export – it stands way above than any other carmaker. Last year, almost 30 percent of the total units produced by Hyundai were made in India.

With an extended push via the Make in India initiative, this export trend is expected to grow rapidly. The Indian Government is offering several incentives to promote exporting with schemes like EPCG, MEIS etc. This helps manufacturers to build products that are in competition with other products in the respective segment.