Context
The Union Minister for Road Transport and Highways has announced that India has emerged as the third-largest automobile industry globally. Also, he put forward that its market size has become about ₹22 lakh crore.
About the Automobile Industry
(i) Global Scenario: The USA has the largest automobile industry around he globe, worth ₹78 lakh crore. China is at 2nd with an industry size of ₹49 lakh crore.
(ii) Indian Scenario: It is an essential component of the country’s manufacturing and economic growth, contributing around 7% to India’s GDP. Also, the industry contributes 49% to manufacturing GDP. Two-wheelers and passenger vehicles are the most popular in the domestic market. In financial year 25, two-wheelers captured around 76% of the total market share, while passenger cars captured around 16%.
Significance of the Automotive Sector
(i) GDP Contribution: Accounts for 7.1% of India’s GDP and nearly 49% of manufacturing GDP. E.g., India’s auto industry supports over 3 million direct jobs.
(ii) Linkages with Other Sectors: Strong backwards and forward linkages with steel, rubber, electronics, glass, IT, etc. E.g., 15% of India’s steel goes to the automotive sector.
(iii) Employment Generation: Potential to add 2–2.5 million jobs by 2030 with planned scaling. E.g., Skilled and semi-skilled roles in OEMs, ancillaries, and EV startups.
(iv) Technology Spillovers: Driving AI, battery innovation, and Industry 4.0 adoption across sectors. E.g., Automotive is the biggest consumer of semiconductors after electronics.
(v) Export Competitiveness: Aims to increase GVC share from 3% to 8%. E.g., India’s current share in global component trade: ~$20B out of $700B
Government Initiatives Driving Growth
(i) Production Linked Incentive (PLI) Scheme for Auto and ACC Batteries: With a total allocation of ₹44,038 crore, the initiative aims to foster the country’s manufacturing of advanced automotive technologies, including EVs, hydrogen fuel cell vehicles, and advanced battery storage solutions.
(ii) FAME-II Scheme: It offers subsidies for electric and hybrid vehicles and charging infrastructure, giving patronage for the adoption of environment-friendly vehicles and ensuring cleaner transportation.
(iii) Vehicle Scrappage Policy: It aims to scrap vehicles older than 15 years to reduce emissions and encourage replacement demand.
(iv) Make in India and FDI Policy: 100% FDI allowance in the segment, along with other polices, has attracted huge investments from both international and national players, giving wings to manufacturing and employment.
NITI Aayog’s Report on Electric Vehicles (EV) in India
Road to a $1 Trillion Economy for Indian States
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What are the Challenges?
(i) Heavy reliance on imports for high-value components like semiconductors and EV batteries.
(ii) It contributes merely 3% to the globally traded auto components market, with very low penetration in high-precision segments.
(iii) Lack of infrastructure for EV charging and hydrogen refuelling stations.
(iv) Environmental Challenges: An Increased number of vehicles leading to increased carbon emissions and environmental challenges.
Way Ahead
(i) Increase domestic production in high-technology automotive components to diminish import dependence.
(ii) Make investments in EV charging networks and hydrogen fuel infrastructure.
(iii) Increase R&D and provide skill training for high-standard manufacturing capabilities.
(iv) Promote recycling, emission control measures, and the adoption of green mobility solutions for sustainable growth.
(v) Policy Harmonisation: Streamline EV policies across States and UTs to align with National Electric Mobility Mission Plan targets (achieve 6-7 million sales of hybrid and EVs year on year from 2020 onwards).
Conclusion:
India’s automotive sector is at a sensitive inflexion point, putting forth significant opportunities to integrate into global value chains. With the specific reforms, skilling, and financial support, India can become a world-class hub for EV components, auto electronics, and precision systems, nudging both domestic growth and global competitiveness.