Here’s How the Indian Automobile Industry Becoming Bigger

According to a report by Grant Thornton Bharat, Indian automobile industry is poised to grow at 12.7 per cent CAGR between 2019-2026 to reach $512 billion by 2026
  • BY Jaspreet Kaur

    Feature Writer, BusinessEx

  • |
  • Apr 12,2021
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  • 10 Mins Read

Automobile industry is swiftly changing over the years. The increase in digital distribution channels and penetration of acclaimed international players are two factors affecting the sector. According to the recent report by Grant Thornton Bharat, Indian automobile industry is poised to grow at 12.7 per cent CAGR between 2019-2026 to reach $512 billion by 2026.

Surge in new vehicle purchase is owing to the increasing bourgeoisie and young demographic along with high disposable income as well as urbanization. Other factors that are stimulating the country's auto sector are shifting consumers’ preferences for personal mobility and government initiatives. 

In the present digital age, physical dealership and e-commerce are helping spike car sales in the country. Physical dealership acts as an indirect channel. Through it, auto manufacturers sell, as well as distribute, auto spare parts. In this model, goods are transferred from point of origin to the point of sale to meet customers’ needs. With this mechanism, auto manufacturers easily sell goods to customers via intermediaries. The channel aids manufacturers in retaining control and each a huge count of potential customers. 

On the flip side, e-commerce has helped auto manufacturers to keep up with the pandemic. As physical outlets closed during the epidemic, online platforms aided in increasing car sales.

Due to seamless customer experience, digital channels are witnessing more customer engagement. Some of the perks of online car platforms are car check, secured payments and quick registration certificate transfer. 

Factors Increasing the Auto Industry 

Apart from business-friendly models, there are several other elements that uphold the auto sector and continue to fuel it for the future. 

Increasing Consumer Base 

According to the cited report, India has roughly 120 vehicles (all segments) for every 1000 people, which is anticipated to rise to almost 300 in the next ten years. Spiking income levels and augmentation in overall employment is influencing consumers' mind. The average household income has reached $18,448 in 2020. 

Urbanisation 

Urbanisation is playing a key role in upholding the country's auto segment. The rate of urbanization is anticipated to increase 36.2 per cent by 2025. The rapid urbanisation will increase the customers' need for automobiles.

Strong Infra and Infusions by International Players

Indian auto market is changing into a global auto research and development hub. In addition to it, various other moves are aiding in strengthening the auto sector such as government-led labour laws and other amendments, and an access to a wide consumer market. As per the cited report, the Indian government is anticipating $8,000-$10,000 million infusions by 2023. Also, investment flows into the Electronic Vehicles startups in 2019.

These factors have strengthened the auto sector. In this critical time, the Indian government is also playing an equal role in increasing the auto industry.

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