Automotive Industry Steers Forward In Low Gear

Just as it was bouncing back after the easing of lockdowns following the pandemic, the automotive industry has once again been hit hard on account of the second wave which has slowed down both production and demand. So, what does the future hold for this stricken industry? Are there any triggers to quicken the pace?

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The automobile industry in India is the world’s fifth-largest. Given that, the automotive and allied companies have pulled up their socks to increase their production and the sector foresees accounting for 65 million new jobs in India. The automotive industry also benefits from global supply chain rebalancing, government incentives to increase exports, and technology disruptions. These developments will contribute in creating opportunities at all levels of the automotive value chain. The Indian automotive industry, including component manufacturing, is expected to reach ₹16.16-18.18 trillion (USD 251.4-282.8 billion) by 2026.

Data released by the Department for Promotion of Industry and Internal Trade (DPIIT) indicates that the industry attracted foreign direct investment (FDI) worth USD 25.40 billion between April 2000 and December 2020, accounting for 5 per cent of the total FDI during the period. The Government of India has been keen on boosting foreign investment in the automobile sector and has given a nod for 100 per cent FDI under the automatic route. In the recent Union Budget 2021-22, the government announced the launch of a voluntary vehicle scrappage policy, which is likely to push up the demand for new vehicles through the removal of old and unfit vehicles.