India became the fourth largest auto market with sales increasing 8.3% year-on-year to 3.99 million units in 2018. It was the seventh-largest manufacturer of commercial vehicles in 2018. India is also a prominent auto exporter and has strong export growth opportunities for the near future.
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However, in 2019, a slowdown in the auto sector has been witnessed still companies are investing significantly in the new plants by anticipating a significant growth in the upcoming period, which will create a significant demand for the automotive industry during the forecast period. For instance, in December 2019, Force Motors planned to invest $85.85 million in order to develop two new models over the next two years. In addition, the industry has attracted FDI worth $23.89 billion during the period April 2000 to December 2019, according to data released by the Department for Promotion of Industry and Internal Trade (DPIIT).
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Recent/planned investments in the automobile sector in India-
- In January 2020, Tata AutoComp Systems entered a joint venture with Beijing-based Prestolite Electric to enter the electric vehicle components market.
- In December 2019, Morris Garages (MG), a British automobile brand announced plans to invest $429.25 million in Indian automobile industry.
- Hyundai is planning to invest $1 billion in India by the end of 2020.
- SAIC Motor has also announced to invest $310 million in India.
- Mercedes Benz has increased the manufacturing capacity of its Chakan Plant to 20,000 units per year, highest for any luxury car manufacturer in India.
The major factors for the growth of the automobile industry in the country include rising government initiatives and subsidies on the electric vehicle, increasing options of the electric two-wheeler among the customers, expansion by the electric vehicle startups, the entrance of the well-established market players, among others. The government of the country is motivating the electric vehicle industry and has allocated around $1.4 billion in February 2019 under the FAME II (Faster Adoption and Manufacturing of Electric Vehicles) scheme for a period of three years. Around 86% of the total amount has been allocated as an incentive for electric vehicles.
The government will support around 7,000 electric buses, 500,000 electric three-wheelers, nearly 55,000 electric cars, and 1 million electric two-wheelers. NITI Aayog (a policy thinks tank of the Government of India) also suggests that all the two-wheelers below 150 cc sold after 31st March 2025 should be electric. Further, the Government of India promotes sales of electric vehicles is also contributing to market growth. For instance, the government announced to provide an additional income tax deduction of $2,146 on the interest paid on the loans taken to purchase electric vehicles under Union Budget 2019-2020.
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