Government schemes for Automotive Industry in India
- National Automobile Scrappage Policy: The Policy aims to establish a system for gradually replacing old, unsafe, and harmful automobiles with newer, safer, and more fuel-efficient ones. The strategy will increase sales of automobiles, create jobs, lower import costs, increase GST revenue, and assist in resolving the worldwide semiconductor chip shortage. The policy will be a crucial link in helping the nation develop a circular economy (from trash to wealth).
- Fame India Scheme: By sponsoring 7000 e-Buses, 5 lakh e-3 Wheeler, 55000 e-4 Wheeler Passenger Cars, and 10 lakh e-2 Wheelers, the Scheme hopes to generate demand. About 2.8 lakh hybrid and electric vehicles received demand incentives totalling about INR 359 crore during the first phase of the FAME Scheme. Under Phase-I of the FAME India Scheme, the Ministry of Heavy Industries approved funding for 520 charging stations and related infrastructure totalling around INR 43 crore. For speedier adoption of electric mobility and growth of electric and hybrid technology to strengthen the eco-system in the country, the Fame India Scheme II is proposed to be implemented over three years with a financial outlay of INR 10,000 crore.
- National Automotive Testing and Research Infrastructure Project (NATRIP): To enable the industry to accept and apply international performance standards, the project was established at a total cost of USD 573 million. It intends to combine the automotive engineering industries with India’s unrivalled strengths in IT and electronics. The provision of affordable manufacturing and product development solutions is the key area of concentration. To carry out NATRIP, the Ministry of Heavy Industries & Public Enterprises has established the NATRIP Implementation Society (NATIS), an independent body. Seven test centres have been chosen as part of the effort to set up the testing facilities: iCAT, GARC, NATRAX, ARAI, VRDE, NIAIMT, and NCVRS.
- The Automotive Mission Plan 2016-26 (AMP 2026): It charts the course of the Indian automotive ecosystem’s development, outlining the precise rules and policies that will apply to research, design, technology, testing, manufacturing, import/export, sale, use, repair, and recycling of automotive vehicles, parts, and services. The automobile industry is anticipated to rank third globally and contribute 12% to GDP. By 2026, the sector has the potential to produce USD 300 billion in revenue and 65 million more jobs. One of the main drivers of the manufacturing sector and the “Make in India” initiative is the automobile industry. It intends to five-fold the number of vehicles exported.
- National Electric Mobility Mission Plan: Through government-industry cooperation, the NEMMP project aims to promote hybrid and electric cars that are reliable, inexpensive, and competent and match consumer performance and price expectations. Additional goals of NEMMP 2020 include the development and promotion of domestic manufacturing capabilities, necessary infrastructure, customer awareness, and technology. Policies designed to gradually ensure that India has roughly 6-7 million electric and hybrid vehicles on the road by 2020, combined with some degree of technical indigenization, guaranteeing India’s position as a world leader in some vehicle segments.
- India wants to switch to electric vehicles in 30% of private automobiles, 70% of commercial vehicles, and 80% of two- and three-wheelers by 2030.
- In September 2021, the Indian government unveiled a PLI program for vehicles and auto parts totalling Rs. 25,938 crores ($3.49 billion).
This program is anticipated to attract investments totalling more than Rs. 42,500 (US$ 5.74 billion) by 2026. - The Indian government altered the existing FAME-II (Faster Adoption and Manufacturing of Electric Vehicles-II) scheme in June of this year to encourage the use of electric two-wheelers in India.
- The government did this by raising the subsidy rate for electric two-wheelers from Rs 10,000/kWh to Rs 15,000/kWh, which helped to narrow the price gap between gasoline-powered and electric vehicles.
Conclusion:
One of the most significant sectors in India’s economy that contributes significantly to global value chains is the automobile industry. Strong government support, which has enabled this sector to carve out a distinct path among India’s manufacturing sectors, has been a major factor in its rise. The country produces cars that are specifically tailored to meet the needs of low- and middle-income populations, setting it apart from other nations that also create cars. More domestic-led enterprises have dominated its growth story. The adoption of international best practices has, however, lagged behind China. More swiftly and comprehensively than in India, the Chinese auto industry’s business strategies accelerated technological learning. India, which can produce goods from start to finish, has developed into a large-car assembly and small-car manufacturing centre. Companies have begun exporting to other nations. Manufacturers in India participate in international innovation networks and source appropriate technologies from around the globe to support their R&D activities. India might climb up the value chain with significant investments in the development of new indigenous technologies that are eco-friendly and adhere to internationally recognized high-efficiency requirements.
Automobile Industry in India
In India, the automobile industry is a vital force behind both macroeconomic expansion and technological advancement. Two-wheelers, trucks, cars, buses, and three-wheelers are all part of the Indian automobile sector, which is essential to the expansion of the Indian economy. Since the 1950s, when India’s yearly vehicle output was capped at 40.000 units, the country’s automotive industry has advanced significantly. The three top manufacturers—Hindustan Motors, Premier Automobiles, and Standard Motors—were limited to early production. Without noting the Pioneer Mr J.R.D. Tata’s involvement in establishing the Tata group with high standard Engineering Research Center (ERC) in 1965 to assist technological advancement, the development story of the Indian automobile industry cannot be considered complete. By developing indigenous technological expertise for trucks in partnership with Mercedes-Benz, Maruti debuted the 800 in 1983, changing the dynamics of the Indian passenger car market. After liberalization, several global corporations began producing in India by 1990. Market development and rising car demand resulted in wholesome industry expansion.
In FY22, 22.93 million automobiles were produced annually in India. Due to India’s large proportion of young people and expanding middle class, the two-wheeler category dominates the industry in terms of volume. Additionally, the expanding interest of businesses in investigating the rural markets contributed to the sector’s expansion. According to statistics from 2021, India has the fourth-largest automobile industry worldwide. India became the fourth-largest nation in the world by automobile industry worth in 2022. The auto sector in India is currently valued at more than $100 billion, produces 8% of the total exports, and accounts for 2.3% of the country’s GDP. ​