Indian automotive landscape: At a glance
Automotive is one of the major driving forces of the manufacturing sector in India, with the sector contributing to 49% of the manufacturing GDP and 12% of the country’s overall GDP. Any impact or change in the growth of this sector will, inevitably, trickle down the overall growth of India. Thus, it is crucial to maintain the momentum in production, sales, exports as well as in the adoption of new trends. However, at present, the sector is in a critical position, after receiving multiple blows over the last three to four years. Right from transition to upgraded safety norms, changing portfolio, which is compliant with BS-VI norms, insurance price hikes to ultimately being struck with the COVID-19 pandemic, the beleaguered auto sector is trying to get back on its feet.
It is a challenge for players in the industry, especially for the original equipment manufacturers (OEMs), as the market is witnessing multiple new technological innovations and shifts in both vehicles and fuel. Newer technologies of hybrid, CNG, bio-fuel, electric, autonomous cars, fuel cell and new battery chemistry are being actively developed and adopted.
Meanwhile, Indian automakers have remained dynamic with concurrent shifts in the industry and embraced changes with a forward-looking approach. On the policy side, the Indian government is working on laying down a stable policy framework under the Automotive Mission Plan 2016-26, National Electric Mobility Mission Plan 2020, National Automotive Testing and R&D Infrastructure Project, PLI scheme and National Auto policy.
Green fuel economy
In terms of going green, electric vehicles technology have been in the spotlight for quite a few years and original equipment manufacturer (OEMs) in India have finally reached a stage where they are rolling out new EV models. The government has also approved an outlay of INR 10,000 crore for three years under the second phase of Faster Adoption and Manufacturing of (Hybrid&) Electric Vehicles (FAME) scheme. Apart from this, in order to boost adoption, there are upfront incentive on purchase and charging infrastructure along with additional income tax deduction of INR 1.5 lakh on interest paid on EV loans and customs duty exemption on certain parts of EVs.
Fuel cell electric vehicles (FCEVs), running on hydrogen, become the ultimate product technology that needs to be adopted, given how efficient it is in comparison with conventional internal combustion engine (ICE) vehicles or plain EVs. However, implementation of the same has not happened actively.
In order to make the automotive sector more competitive and enhance its global reach, the government of India has extended its Production Linked Incentive (PLI) scheme with the allocation of a majority part of its INR 26,058 crore budget to the 'automobiles and auto components' sector. Launched in March 2020, the PLI scheme aims to provide incentives on specified products manufactured in India, further boosting domestic manufacturing and reduction in import bills. With the introduction of this scheme, domestic companies are being encouraged to set up or expand existing manufacturing units.
Further, the National Auto Policy rolled out by the government lays down a long-term roadmap for the automotive industry and defines emission standards.
The Indian auto sector is undergoing a major transformation and there is an increased emphasis on the use of technologies to streamline the processes and promote efficiency at every stage. Connectivity, the Internet of Things, wireless solutions, adoption of electric vehicles, embedding Artificial Intelligence (AI) and augmented reality from production to supply chain, the auto industry is witnessing all of it right now. From manufacturers to dealers, every stage of automobile sale has embraced digitalisation. Today, analytics is helping not only mobility companies in the virtual sphere, it is also playing a crucial role in redefining retail stores.
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What Grant Thornton Bharat can do for you
We, at Grant Thornton Bharat, envision to provide end-to-end solutions for all our clients in this sector. By coming up with innovative and creative solutions, our team helps clients solve their crucial business predicaments and anaylse future growth plans. Our automotive team, with expertise in growth, risk, audit and advisory, caters to holistic approaches that enable business to perform better and elevate their functionality.
Within the sector, we offer specialised services for:
- Automotive retail
- Electric mobility
To gauge the market sentiments and better understand the expectations from Union Budget 2022, Grant Thornton Bharat conducted a pre-budget survey for auto sector.