Thursday, 7 April 2016

How Modi’s ‘Make In India’ Campaign is Boon for India’s Automobile Sector

Posted by MyInvestmentsPub
“Come, make India your workplace. This is the best time ever to be in India and it’s even better to Make in India,” – Narendra Modi, India’s Prime Minister

For inspiration, people don’t need to look beyond the vast automobile sector that caters to demands of both domestic and foreign buyers. Just to illustrate, Ford India sold 21,520 vehicles in domestic wholesales and exports in August 2015, as compared to 14,092 vehicles in August 2014. Following the launch of Modi’s Make in India campaign in September 2014, the Indian government has consistently pursued its vision to promote the country’s automotive industry on a global front. The automobile industry has greatly benefited from this campaign as many international car players are now investing heavily in India to set up production units that are big enough to meet the rising demands of Indian and foreign markets alike.

Make in India: A huge impetus to India’s Automobile Sector


As one of the world’s largest auto markets — with a yearly sales of 19.9 million vehicles in 2015—India’s automobile industry is all set to become the real force behind the government’s ‘Make in India’ initiative. Despite a year in which their sales dwindled, many of the world’s largest automobile companies have set up their manufacturing units in India due to its vast size and availability of manpower.  


Source: Livemint.com

In FY 2014-15, nearly 31% of small cars sold globally were manufactured in India. The country’s auto market has the potential to grow to six million plus units annually by 2020. As per the document titled Auto Mission Plan (AMP) 2016-26, the commercial vehicle segment is expected to grow at an average yearly pace of 7.5%

Source: ibef.org

India: A main export hub

The government wants to turn the automobile industry into the ‘mother of all manufacturing activities’ by making it the engine of Narendra Modi’s ‘Make in India’ initiative. Recently, Volvo launched ‘DC Avanti’, its first indigenous sports car in India. Also, it unveiled its 8400 hybrid city bus in the country with Navi Mumbai being the first city to have such buses. As several international automobile makers have started investing funds in different segments of the industry, these trends are only bound to rise in the future.
For the first time in its history, Maruti Suzuki has decided to export its new Made-in India ‘Maruti Suzuki Baleno’ to Japan, which is the native country of its parent company Suzuki. It clearly indicates that the company is planning to make India its new export hub. Another car maker that has taken Make in India initiative seriously is Volkswagen AG, one of the largest car makers in Europe.The company unveiled its made-for-India ‘Sedan Ameo’, at recently concluded Make in India event in February.

Source: Livemint.com

The exports of utility vehicles, cars, commercial vehicles and two-wheelers have increased every year since 2000. According to data released by Department of Industrial Policy and Promotion (DIPP), the automobile sector has attracted foreign direct investment (FDI) worth US$ 14.32 billion during April 2000 to December 2015. Both domestic and foreign car makers have made investments of nearly Rs 60,000 crore over the last few years. Some of the key investments and developments in the automobile sector are:



Source: The Economic Times

India continues to be a major exporter of Maruti Suzuki branded cars. Other manufacturers have also made India their main manufacturing centers for exports. Based in Seoul, South Korea, Kia Motors, a subsidiary of Hyundai, is all set to build a factory in India. Also, China’s largest truck maker, BeiqiFoton will manufacture and sell passenger vehicles in India under a German brand. While passenger car makers, like Hyundai and Maruti Suzuki, have already started exporting small cars from India to Europe, heavy-duty commercial manufacturers have just started considering this thought.

Some of the foreign car makers present in India are:

Name of the Car Maker
Native Country
Suzuki
Japan
Nissan
Japan
Piaggio
Italy
Volkswagen
Germany
Renault
France
Hyundai
South Korea
General Motors
USA
BMW
Germany
Ford
USA
Toyota
Japan

Over the years, car exports from India have reached to a level of around six lakh units annually. Even luxury car makers have increased the use of indigenous components and expertise. Last year, BMW had achieved 50% localization across all its eight car models sold in the country. Further, Mercedes-Benz declared that its C220CDI has a localization level of 60%.

Initiatives taken by Indian government

The Government of India has taken some initiatives to bolster foreign investment in the automobile sector. The ‘Automotive Mission Plan (AMP): 2006-16” has been prepared to make India a thriving automobile hub. Here are some of the initiatives taken by the government:
  •         100% foreign direct investment (FDI) is allowed in the automobile segment
  •         Manufacturing and imports in the automobile sector are free from license and approvals
  •         The government has launched a NMEM 2020 in 2013 to make India a 100% electric vehicle nation by 2030

A road ahead

India is on the threshold of major reforms and developments and is poised to become the world’s third-largest economy by 2030. As per the Automotive Mission Plan 2016-26, the automobile sector is likely to produce up to $300 billion annual revenue by 2026, contributing more than 12% to the country’s gross domestic product and generating over 65 million jobs.



Welcoming Narendra Modi’s ‘Make in India’ campaign, many automakers have ramped up their production in the country. Some global automakers have either started operating their factories round the clock or are in the process of increasing their shift timings to meet rising export demands in a resounding endorsement of the government’s call to ‘Make in India’ campaign.For instance, Ford Motor’s manufacturing unit in Tamil Nadu is working in three shifts a day. Similarly, Europe’s largest car maker, Volkswagen is all set to start its third shift. Both domestic and international auto makers have committed to invest billions of dollars in the country, enticed by opportunities offered by local markets as well as its manufacturing capabilities. 


Source: ET Auto.com

The Bottom Line

With India’s doors open to foreign car manufacturers, the auto industry is bound to see a host of radical changes over the next few years. Further, growth in the automobile sector will create more job opportunities for people associated with this industry. Also, with an increase in the production and sale of cars, there will be a need of new car insurance policies to protect vehicles from all perils. As it is mandatory by Indian law to have a third-party insurance to ply your vehicle on roads, car insurance companies are expecting a surge in their business revenue.

Overall, Modi’s Make in India campaign is a win-win situation for both consumers and companies. The country has already become the largest manufacturer of motorcycles and the second-largest two-wheeler manufacturer in the world, and as a result, the plan of India’s automobile sector to reach 7 million vehicles milestone by 2020 is no longer a far-fetched idea but rather an achievable reality. 

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