MOBILITY IN INDIA:

CURRENT STATUS & FUTURE DEMAND

AUG 2019
 TABLE OF CONTENTS

Contents
MOBILITY IN INDIA: CURRENT STATUS ............................................................... 3
DEMAND DRIVERS ........................................................................................ 3
ENABLING INITIATIVES BY THE GOVERNMENT .......................................................... 4
RECENT INVESTMENT ANNOUNCEMENTS............................................................... 5
 MOBILITY IN INDIA: CURRENT STATUS

AUTOMOBILE INDUSTRY
● India is the 4th largest automotive market in the world after China, USA, Japan
● India is the 5th largest auto producing nation after China, USA, Japan, Germany
● Auto is a $118 Billion industry and accounts for 7.1% of the country’s GDP
● Auto accounts for 49% of the country’s manufacturing GDP
● Auto industry employs ~32 million people both directly & indirectly
● 100% FDI is allowed under the automatic route in the automobiles sector
o Attracted USD 19.3 billion FDI from April 2000 to Aug 2018
o Attracted 5% of total FDI inflows
● No. of electric vehicles sold (till Oct 2018) - 2,53,981 (<2% of all vehicles)

Market Share of Sub-Sector

Sub Sector Current 2026E
2-Wheelers 80% 73%
Passenger Vehicles 14% 18%
3-Wheelers 3% 4%
Commercial Vehicles 3% 5%

AUTO - COMPONENTS INDUSTRY

● Auto components industry contributes towards 25.6% to the manufacturing GDP
and 2.3% to the national GDP, providing direct employment to 6 mn (estimated) as
per NSDC report in 2017
● Auto component industry turnover: USD 51.2 billion (FY 2017 – 2018); Growth rate
of 18.3%
● Exports market size: USD 13.5 billion (FY 2017-18)
● Auto Component Industry Goals (2026): Turnover USD 200 bn; Export USD 80 bn;
Domestic Aftermarket USD 32 bn; and Direct Incremental employment 3.2 mn
● Electric vehicles (EVs) components are expected to grow to USD ~12 bn in India by
2025 and be ~8% of global electric vehicles (EV) 4W component market in a electric
vehicles (EVs) scenario with 18% electric vehicles (EVs) penetration in India by 2030.

DEMAND DRIVERS

● Vehicle Penetration: Expected to grow from current 20 vehicles per 1000 people to
72 per 1000 people by 2025
● Youngest nation by 2025, with an average age of 25 years
● Availability of cost effective labour - The hourly labour cost in India for
manufacturing averages at 92 cents as opposed to USD 3.52 in China
● Government Support: 100% FDI under automatic route; Automotive Mission Plan
(2016- 26); FAME Scheme (Promoting & Incentivizing E-vehicles)
● Expanding R&D Hub - India accounted for USD 12.3 billion, or 40%, of the total of
USD 31 billion of globalized engineering and R&D. Further, India accounted for USD
7.8 billion, or 21.6%, of the total outsourced engineering and R&D services of USD
36 billion in 2015.

ENABLING INITIATIVES BY THE GOVERNMENT

● Budget 2019: The government reduced the import duty on various categories of
electric vehicles.
o EV with disassembled battery pack, motor, brake system, and others which are
not mounted on chassis - 10 % duty
o EV with assembled battery pack, and rest being same as the previous category -
15 % duty
o Complete EV being imported - 25 % duty
● Draft National Automotive Policy (Feb’18)
o Plan for reduction in CO2 emissions through Corporate Average Fuel Economy
(CAFE) regulations
o Suggests harmonization of standards according to UNECE WP.29 1958
agreement (UNECE proposes harmonization or development of technical
regulations for vehicles)
o Proposes 3 slabs for exemption on R&D exemption as a percentage of turnover
o Upgradation of both the capacity and capability of vehicle testing agencies
o Support readiness and fast track adoption of Bharat New Vehicle Safety
Assessment Program (assigns star ratings based on the safety performance of
vehicles)
o Suggest introducing a composite length and emissions-based criterion for
vehicle taxation
o Set-up a ‘Technology Acquisition Fund’ to acquire technologies through licensing
agreements, joint ventures or acquisitions
● Policy for Electric Vehicles: FAME (Faster adoption and Manufacturing of Hybrid
and Electric Vehicles) has 4 focus areas: Technology development, Demand
Creation, Pilot Projects, Charging Infrastructure.
o Phase 1 – Launched in 2015, the phase 1 has a budget allocation of INR 795Cr
till March 2018. The policy has been extended for the 4th time. Expiration date:
31st March 2019. Rs. 253Cr have been allocated as demand incentives to
subsidise 2,53,854 hybrid/electric vehicles (EVs) till October 2018. Under this
phase, Government has also sanctioned projects related to establishment of
charging stations.
o Phase 2 (Proposed) – The policy was expected to be launched during the MOVE
Summit in Sept 2018. However, it was not launched during the summit. No
launch date has been disclosed. The budget of the phase 2 is proposed to be
$785mn (INR 5,500Cr) over 5 years. The Phase 1 was restrictive in extending
 incentives all categories of vehicles; Phase 2 will be inclusive of all categories of
vehicles.
● Recent tax reductions attracting investments in smart mobility/ Low Emission
vehicles:

Type Product Past (%) 2018 (%) 2019(%)

Battery Pack 28 18 18

Electric
GST 28 12 5
Vehicle

Hybrids 28 28 28

● Automotive Mission Plan (AMP) (2016 – 26) envisions to develop India as one of
the top 3 automobile manufacturing hubs in the world with a turnover of USD 300
bn by 2026. It clearly lays out the government’s collective vision on how the
automotive sector should grow regarding size, contribution to national
development, technological maturity, global competitiveness and institutional
structure.
● National Automotive Testing and R&D Infrastructure Project (NATRiP) - NATRiP
aims to create a testing, validation and R&D infrastructure, and as invested USD 571
mn for setting up of seven auto testing facilities at seven locations across India
● National Electric Mobility Mission Plan 2020 (NEMMP) - Aims at creating a vehicle
base of ~7 million electric cars by 2020
● Charging as a Service: Ministry of Power has issued a notification clarifying a clause
in the Electricity Act 2003 that charging for the purpose of charging an electric
vehicle is classified as a service and that no licence is required for this business
activity. Previously, only licenced electricity distribution companies had the right to
sell power. Requiring a licence to set up charging infrastructure was a bottleneck
hampering the growth of the sector.

RECENT INVESTMENT ANNOUNCEMENTS

 Oct 2018: Honda to invest Rs 9,200cr in electric, largest for India car business
 Sept 2018: Ather is setting up charging network for its e-scooters called Ather Grid
 July 2018: Skoda to invest INR 7900 cr in India
 Jun 2018: Munoth to invest Rs 799cr(~$118m) for making Lithium ion batteries
 March 2018: SAIC Motor investing USD 767 mn in India market
 Feb 2018: Mahindra and LG Chem collaborate for Li-ion battery technology
 Feb 2018- Suzuki to invest USD 3 bn in India over 3 years
 Feb 2018- Cummins to invest USD 500 mn for powertrain technology in India
 Jan 2018- Hyundai to pump in USD 1 bn in India by 2020
 Oct 2017: Octillion Power to open EV battery manufacturing facility in Maharashtra
 Sept 2017: Suzuki-Toshiba-Denso to set up lithium-ion battery plant in Gujarat
 April 2017- Kia Motors to invest USD 2 bn; create 3,000-4,000 jobs by 2022