The report offers an extensive analysis of India’s automotive sector
BIBHU PARDHAN
NITI Aayog today released a report titled “Automotive Industry: Powering India’s Participation in Global Value Chains”. The report offers an extensive analysis of India’s automotive sector. It highlights both opportunities and challenges and outlines a pathway for positioning India as a key player in global automotive markets.
The report was launched by Vice Chairman, NITI Aayog Suman Bery in the presence of CEO, NITI Aayog BVR Subrahmanyam. NITI Aayog’s report also outlines several strategic fiscal and non-fiscal interventions aimed at enhancing India’s global competitiveness in the automotive sector. The interventions are structured across four categories of automotive components based on their complexity and manufacturing maturity which are Emerging and Complex, Conventional amd Complex, Conventional and Simple and Emerging and Simple.
As per the report, in 2023, global automobile production reached approximately 94 million units and the global automotive components market was valued at two trillion US dollars , with the export share reaching nearly 700 billion dollars. India has emerged as the fourth-largest global producer after China, USA and Japan, with an annual production of nearly six million vehicles. It added that the Indian automotive sector has gained a strong domestic and export market presence, particularly in the small car and utility vehicle segments. The report also highlights that with ‘Make in India’ and its cost-competitive workforce, India is positioning itself as a hub for automotive manufacturing and exports.
Speaking on the occasion, NITI Aayog CEO BVR Subrahmanyam said that detailed analysis has been done to prepare the report. He said. the global auto component market is two trillion dollars and out of this, India’s share is 70 billion dollars.
Challenges Facing India’s Automotive Sector
Despite being the fourth-largest automobile producer globally, India has a modest share (around 3%) in the global automotive component trade, which amounts to approximately $20 billion. The bulk of global trade in automotive components is driven by engine components, drive transmission, and steering systems, but India’s share in these high-precision segments remains low at just 2-4%. India’s automotive sector faces challenges on account of operational cost, infrastructural gaps, moderate GVC integration, inadequate R&D expenditure etc. that hinder its competitiveness in the global value chain (GVC).
Proposed Interventions for Growth
NITI Aayog’s report outlines several strategic fiscal and non-fiscal interventions aimed at enhancing India’s global competitiveness in the automotive sector. The interventions are structured across four categories of automotive components based on their complexity and manufacturing maturity i.e. Emerging & Complex, Conventional & Complex, Conventional & Simple and Emerging & Simple.
Fiscal Interventions
- Operational Expenditure (Opex) Support: To scale up manufacturing capabilities, with a focus on capital expenditure (Capex) for tooling, dies, and infrastructure.
- Skill Development: Initiatives to build a talent pipeline critical for sustaining growth.
- R&D, Government facilitated IP transfer and Branding: Providing incentives for research, development, international branding to improve product differentiation and empowering MSMEs through IP transfers.
- Cluster Development: Fostering collaboration between firms through common facilities such as R&D and testing centers to strengthen the supply chain.
Non-Fiscal Interventions
- Industry 4.0 Adoption: Encouraging the integration of digital technologies and enhanced manufacturing standards to improve efficiency.
- International Collaboration: Promoting joint ventures (JVs), foreign collaborations, and free trade agreements (FTAs) to expand global market access.
- Ease of Doing Business: Simplifying regulatory processes, worker hour flexibility, supplier discovery & development and improving business conditions for automotive firms.
Vision for 2030
NITI Aayog’s vision for India’s automotive sector by 2030 is ambitious yet achievable. The report envisions the country’s automotive component production growing to $145 billion, with exports tripling from $20 billion to $60 billion. This growth would lead to a trade surplus of approximately $25 billion and a significant increase in India’s share of the global automotive value chain, from 3% to 8%.
Additionally, this growth is expected to generate 2-2.5 million new employment opportunities, bringing the total direct employment in the sector to 3-4 million