India’s Automobile Industry: Growth, Trends and Key Players

The automobile industry is a cornerstone of global economic growth, technological innovation, and cultural evolution. In India, this sector serves as a key barometer of economic health, significantly impacting macroeconomic expansion and technological progress. In this article, learn about the Indian automobile sector growth, along with the SWOT analysis and the stocks involved. 

Automobile Sector Growth in India

In India, the two-wheeler segment leads the market in volume, driven by a growing middle-class and youth demographic. Additionally, companies are increasingly exploring rural markets, further boosting sector growth. The demand for commercial vehicles is rising due to expanding logistics and passenger transportation industries, while future growth will likely be propelled by trends like vehicle electrification, particularly in three-wheelers and small passenger cars.

As of June 2024, the production figures for the Indian automobile sector reached 2,336,255 units for passenger vehicles, three-wheelers, two-wheelers, and quadricycles. In FY24, total production was recorded at 28,434,742 units. The Indian passenger car market, valued at approximately US$ 32.70 billion in 2021, is projected to expand to US$ 54.84 billion by 2027, registering a robust CAGR of over 9% from 2022 to 2027. 

India has made notable growth in the EV sector, achieving the sale of 1,325,112 EVs in FY24 (up to January 2024), highlighting the country’s commitment to sustainable mobility and a greener future. In addition, the Indian government has committed that by 2030, 30% of the new vehicle sales in India will be electric.

SWOT Analysis of the Indian Automobile Sector

Strengths:

• Large Domestic Market: India’s vast population and growing middle class provide a significant domestic market for automobiles.
• Cost-Competitive Manufacturing: Indian manufacturers have a competitive advantage in terms of production costs, which has attracted global investments.
• Skilled Workforce: The country has a large pool of skilled labour, designers and engineers, which is essential for the automotive industry.
• Government Initiatives: There are several supportive government initiatives and policies, such as ‘Make in India’ and schemes for electric vehicles, encouraging growth and investment in the sector.

Weaknesses:

• Infrastructure Challenges: Inadequate road quality and infrastructure, particularly in rural areas, can hinder the growth of the automobile market.
• Regulatory Hurdles: Complex regulatory frameworks, including emission standards and safety regulations, can increase costs and slow down product development.
• Supply Chain Vulnerabilities: Dependence on imports for certain components can make the industry vulnerable to global supply chain disruptions.

Opportunities:

• Growing Rural Market: The untapped potential of the rural market presents significant opportunities for growth.
• Electric Vehicle Adoption: India’s focus on electric vehicles can create new market segments and drive innovation.
• Export Markets: The Indian automotive industry has the potential to expand its exports to other countries, especially in emerging markets.

Threats:

• Economic Slowdowns: Economic downturns can impact consumer demand for automobiles.
• Competition from Other Modes of Transportation: Public transportation and ride-booking services can compete with traditional car ownership.
• Environmental Concerns: Increasing concerns about pollution and climate change could lead to stricter regulations and impact the demand for certain types of vehicles.

Massive Investments and Expansions by Automobile Stocks

While government support and public demand are driving the growth of the automobile sector, several companies within the industry are expanding and adding value. In early 2024, the Indian automobile sector saw significant investments and expansions. 

Hyundai Motors, in February 2024, announced plans to invest over US$ 3.85 billion (₹32,000 crore) between 2023 and 2033 to expand its electric vehicle (EV) range and improve its car and SUV platforms. Meanwhile, Mercedes-Benz committed to investing US$ 24.04 million (₹200 crore) in India in 2024, planning to introduce more than a dozen new cars, including EVs, throughout the year. 

Tata Motors Group signed a Memorandum of Understanding (MoU) with the Government of Tamil Nadu in March 2024 to explore establishing a vehicle manufacturing facility, with a planned investment of US$ 1,081.6 million (₹9,000 crores) over 5 years. 

Later in April 2024, Tata Motors also inaugurated a new commercial vehicle spare parts warehouse in Guwahati. Similarly, Maruti Suzuki India Limited commissioned an additional vehicle assembly line at its Manesar facility in April. Apart from this, there are many other contributions made to the sector.

Listed Stocks in the Automobile Sector in India

Note: The automobile stocks list provided here is as of September 24, 2024. The stocks are sorted based on the market cap. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.