Automobile Industry in India 2023 | Growth | Future | History & More

The Automobile industry is one of the high contributors to global value chains and one of the most vital drivers of the economic growth of India. The Government of India has continuously emulated the automobile industry by creating a unique route between India’s manufacturing sectors.

The automobiles produced domestically meet the demands of the middle and lower income groups of the population, making the region one of the largest among other automobile-producing countries. In this article, you learn about infrastructure, government policy, and other allowing elements in the development of the automotive and automobile component sectors of India.

Facts to know:

  • India became the world’s 4th largest automobile market in 2017. The country fulfills the demand for Indian vehicles for both domestic and international markets.
  • Currently, Nitin Gadkari, the Union Minister for Road Transport and Highways, stated that India’s automobile industry has likely to be number one in the world in the upcoming five years through substitution fuel sources.
  • India is deemed to be the world’s 3rd largest automotive market in terms of volume by 2030.
  • A report published by the European Automobile Manufacturers Association in April 2018 stated that India ranks fourth among the top 10 global car-producing countries.

Automobile Industry in India – Overview

Initiatives taken by the Government of India like Automotive Mission Plan 2026 and Make in India have given impetus to the country’s automotive industry. The mission is a joint vision of India’s automotive industry and government to make the Indian automotive sector a driving force behind the Make in India initiative. For the FAME-II scheme, the government passed a financial assistance cost of USD 1.39 billion in February 2019 for the fiscal year 2020 to 2022.

Leading factors growing the Indian Automobile Industry

  1. Government Policies and Initiatives

The Indian government aims to achieve two purposes – reducing oil dependence and emissions and facilitating long-lasting growth in the sector through the National Electric Mobility Mission Plan, the Automotive Mission Plan, and other policies.

The industry and government set a target to expand exports sevenfold to dollar 80 billion, and triple industry revenues to dollar 300 billion in the Automotive Mission Plan 2026.  Predictably, the automobile sector provides direct and indirect jobs, resulting in reduced emissions and improved manufacturing competitiveness.

The government is also working on ideas that highlight the creation of scrappage policies or end-of-life. It aims to provide enticement for the acceptance of these policies with the help of discounts on buying prices, lower taxes, and simple compliance processes.

  1. Demographic trends and favorable macroeconomic

India’s GDP has about 7% contribution from the automotive sector, which increase by 12% after the Automotive Mission Plan 2016 to 2026. Due to the rapid increase in population living in cities, there is an increase in instant urbanization.

Some people will go straight to the four-wheeler segment while others will go for two to four-wheelers. Indian cities like New Delhi are the center of attraction for car manufacturers. According to statistics, these demographic and macroeconomic trends could alter the passenger vehicle market in the upcoming time. And the majority of development is expected to come from new segments such as Sedans, SUVs, and luxury vehicles.

How Indian can benefit from Automobile Industry?

Below given are some of the major advantages of the Indian Automobile industry:

  1. Job Opportunities

India could be a leader in shared mobility by 2030, offering job opportunities for autonomous and electric vehicles. To reduce emissions, the government aims to enhance the production of electric vehicles. The electric vehicle sector is estimated to produce 5 crore jobs by 2030.

  1. Rising Investments

Between April 2000 to March 2022, the Indian automobile sector received increasing equity FDI inflow of around US dollar 32.84 billion. The Indian government expects the automobile industry attracts US dollar 8 to 10 billion in foreign and local investments by 2023.

  1. Increasing Demand

A huge youth population and an increase in the income of the middle class will increase the demand for motor vehicles. This year, the total production of passenger vehicles including two-wheelers, three-wheelers, and quadricycles stood at 1,874, 461 units in April.

  1. Policy support

The Government of India issued a notification in September 2021 related to the PLI scheme for auto components and automobile costs of Rs 25,938 crore (approximately US$3.49 billion). The Automotive Mission Plan is a mutual initiative by the Indian automotive industry and the Government of India to prepare a roadmap for the development of the industry.

History of the Indian Automobile Industry

A vehicle entered the Indian road for the first time in 1897. Automobiles were imported directly from other countries as Indians was not have any manufacturing facilities till 1930. In 1940, the manufacturing process was initiated, with Indian companies such as Premier and Hindustan Motors starting to manufacture cars from other firms. In the same year, the first car was launched in the Indian market, and companies like Mahindra & Mahindra also started manufacturing essential vehicles.


India’s automotive industry is motorized by the enhancing disposable income, rising population, and presence of financing and credit. In addition, the industry is likely to experience increased demand for commercial vehicles from the passenger transport sector and booming logistics. The initiatives and policies launched by the government play a vital role in influencing the growth of the market and are expected to sustain the growth in the coming years.

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