India Emerges as the World’s Third-Largest Car Market

Regarding the Car Industry

Global Landscape: The United States boasts the biggest automobile sector globally, worth ₹78 lakh crore.

China holds the second position with an industry worth ₹49 lakh crore.

Indian Context: The automotive sector in India is a vital component of the country's manufacturing and economic development, accounting for approximately 7.1% of India’s Gross Domestic Product (GDP) and 49% of the manufacturing GDP.

The domestic market is predominantly led by two-wheelers and passenger cars.

In FY25, two-wheelers represented 76.57% of the overall market share, whereas passenger vehicles made up 16.80%.

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State Programs Accelerating Expansion

Production Linked Incentive (PLI) Scheme for Auto and ACC Batteries: Aimed at enhancing domestic production of cutting-edge automotive technologies, including EVs, hydrogen fuel cell vehicles, and advanced battery storage solutions, this initiative has a total budget of ₹44,038 crore.

FAME-II Scheme: This program offers financial assistance for electric and hybrid vehicles along with charging facilities, promoting the use of environmentally friendly vehicles and aiding in cleaner transport.

Vehicle Scrappage Policy: Aims to eliminate vehicles over 15 years old to reduce emissions and encourage demand for replacements.

Make in India and FDI Policy: The policies, especially the full 100% FDI permission in the automotive industry, have drawn considerable investments from international and local entities, enhancing production and job creation.

What are the obstacles?

Significant reliance on imports for critical components like semiconductors and electric vehicle batteries.

Only a small portion of around 3% in the worldwide traded auto parts market, with minimal presence in high-precision areas.

Insufficient infrastructure for charging electric vehicles and hydrogen refuelling stations.

Environmental Issues: Growing number of vehicles resulting in higher carbon emissions and ecological worries.

Path Forward

Boost local sourcing in advanced automotive parts to lessen reliance on imports.

Increase investments in electric vehicle charging networks and hydrogen fuel systems.

Improve research and development while offering skill training for advanced manufacturing skills