Automotive Industry is important among the fundamental sectors for the economy of India, and it also acts as a harbinger for the status of the economy as a whole to a significant extent. While a concerning decline in sales of commercial vehicles (CV) indicated approaching economic difficulties in both 2019 and 2012, a sharp increase in sales of two-wheelers and passenger vehicles was a forerunner of positive news for economics dated back in 2010.
Within India’s manufacturing sector, the production of transportation equipment is responsible for between 10 and 12 % of the country’s net gross value added.
Any kind of deterioration in the sector has a huge negative impact on India’s economic performance. When there is a decrease in car sales, there is also a significant impact on employment. This is because the automotive industry is responsible for the creation of 37 million jobs, both directly and indirectly, while also driving job development through different industries.
Although the Indian automobile sector has been confronted with several obstacles in recent years, including the catastrophic COVID-19 epidemic, its expansion potential is evident. It is anticipated that the sector would be responsible for the creation of new employment which amounts to almost 65 million inside India by the year 2026 due to the growth in output by companies.
To assist both domestic and foreign investors in India in capturing new opportunities as the expansion of the market happens, we analyzed the recent state of the automotive sector in India and identified the enablers and imperatives necessary for success. This will allow us to assist both national and international players in India.
The difficulties that have been overcome and the opportunities for expansion in the Indian automobile industry
After regulatory changes to the driveshaft standards in September of 2018, what started as a controlled fire with a decline in CV sales—turned into a complete conflagration on a scale unseen in the previous 20 years as fundamental economic issues grabbed the Indian automotive sector. This firestorm reached a level unseen in the previous two decades.
The availability of credit decreased, demand slowed (particularly in the infrastructure and mining industries), and consumers spent less money on discretionary items, which finally led to a downturn in automobile sales.
At the beginning of the year 2020, just when it was anticipated that the sector would start to improve, the pandemic caused by COVID-19 created obstacles that harmed demand and interfered with the intricately intertwined supply networks of the automotive industry.
However, things have been looking up more recently, which is a good sign. In the latter half of the year 2020, travel restrictions were loosened by the government, India’s crop was successful, and the holiday season boosted consumption in good quantity. During that period, sales of 2Ws & PVs showed signs of improvement as compared to the previous month (exhibit)
The Indian automobile sector appears to be resolving the majority of its obstacles, and many of those challenges are now in the industry’s rearview mirror. This is despite the persisting difficulty provided by the pandemic.
Participants in the industry are now starting to observe a clean roadway ahead of them, where they may step on the pedal, pick up speed, and shift into a higher gear. As a result of our study, we have condensed certain obligations and enablers the industry players need to grasp to attempt effectively fast-track respective trajectories of the creation of wealth. These must be understood by industry participants.
Priorities for the automobile manufacturing sector in India
The pursuit of growth, the enhancement of resilience, and the pursuit of leadership by way of the promotion of disruptive trends are three imperatives that are essential for successful firms.
Emphasizing local growth, international expansion, and downstream expansion
Any company needs growth to survive, but this is truer when the sector is emerging from a difficult phase. As a result of this, participants in the automobile sector based in India should think about chasing any chances that look potential.
The market on the home front. Although first-time purchasers have long had a dominant position in the Indian automobile market, recent trends have shown that repeat consumers are becoming increasingly important. It is possible that the market for resale cars could become a lot more significant as a result of the government’s plan to revise its scrappage policy.
If manufacturers want to shift their focus to repeat customers, they will need to create innovative tactics that make it easier for older vehicles to be resold in a variety of market segments. Already, there have been attempts made by a few new businesses to streamline and enhance the purchasing and selling of old automobiles. It may be possible for manufacturers to assist revitalize urban demand if they take deliberate steps to change the landscape of resale.
The businesses in the Indian automotive sector should also work toward luring clients who are looking for good deals from the industry itself.
Automobile manufacturers have the opportunity to innovate by providing prospective buyers with a variety of alternative ownership alternatives. At the same time, they may make it possible for new clients to access the market via more entry points. Some manufacturers now provide leasing alternatives, particularly in the passenger vehicle (PV) market; nevertheless, their offerings are restricted in terms of the types of vehicles, lease durations, and other amenities that may be leased.
As the mobility demands of millennials continue to change and shift toward indirect ownership, the domestic market will require the creation of more advantageous leasing solutions as soon as possible.
Direct-to-customer solutions are essential for automobile manufacturers to establish in light of the growing popularity of digital channels among India’s consumer classes. A digital plus analytics transformation that is the finest in its class may also help CEOs to publicize their USP.
Possibilities are available on a global scale. Increases in per-capita GDP are being seen in international markets, particularly those that are in Africa which is analogous to India, which are nearing levels where one can observe a rapid increase in the sales of Automobiles.
This is notably true of international markets in Africa. Indian businesses have previously negotiated this transformation on the domestic front, and they may use that experience to their advantage when competing in foreign markets.
The Automakers based in India will see increased growth as well as sales volumes as a result of their expansion into international markets. At the same time, they will diversify their risks and reduce the cyclical nature of demand.
When they extend their operations overseas, Indian automobile manufacturers will not need to begin from square one. Their brands have already established a significant presence around the globe in specific markets, such as the two-wheeler (2W) and three-wheeler (3W) markets, and as a result, they have gained valuable insight while experiencing this.
Customers in emerging markets are likely to find that products from India, with their strong value a customer and exceptional functioning, provide the perfect fit for their needs.
