India has an extremely fast-growing car market in the world. In this guide, learn all about the growth and future trends of the Indian automobile industry and the most profitable car business ideas you can start.
India has made tremendous progress in the automotive sector. After the liberalization in the 90s, foreign direct investments (FDIs) in the automotive industry have skyrocketed. Today, India is one of the largest car manufacturers in the world. Thus, starting a business in the automotive industry can produce high-profit margins. Let’s take a look at the Indian car market and some of the most profitable car business ideas.
Car Market in India
Ever since the 2000s, the Indian car market has been on an upward trajectory. According to estimates by IBEF, the Indian automotive industry is expected to cross USD 300 billion by 2026.
In the past 21 years, the industry has managed to secure USD 30.51 billion in FDIs alone. The passenger car market is one of the most dominant segments of this industry. This is why India ranks fifth in the global production of passenger cars per capita.
Between 2016 to 2020, domestic automobile production grew by a CAGR of 2.36%. Going by recent numbers, in September 2021, the production of passenger vehicles crossed 21 lakhs. This is indicative of how huge the car market is in India.
Future trends in the Automobile industry
The future of the automobile industry in India is showing signs of steady growth. The inclusion of the EV market has further helped the industry.
The EV market is expected to swell at a CAGR of 30% by 2026. Additionally, several startups have made buying, renting, and selling cars easier than ever before. This has significantly improved the affordability and accessibility of cars in India.
The Most Profitable Car Business Ideas
There are several business ideas in the automotive industry. From spare part manufacturing to car dealerships, every business offers unique advantages and variable profit margins. However, profits are not fixed under any business.
Profit margins depend on the size of the investment, type of service and product, and many more operation factors. Below are some of the most trending and profitable car business ideas in India:
Car Accessories Business
Manufacturing and selling car accessories are niche business opportunities. According to Business Standard, the Indian car accessory market is valued at INR 1,200 crore with an astounding growth rate of over 20% every year. This industry is largely dominated by unorganized players as they account for over 60% of the market.
As newer passenger cars are released every year, these businesses become the hub of B2C and B2B accessory sales. Products such as entertainment systems, mirrors, seat covers, upholstery, etc. fall under car accessories. Due to the feasibility of e-commerce, car accessories can even be sold without a store, further cutting down costs and increasing profits.
Car Dealership Business
A car dealership business is the frontrunner of the automotive industry. This sector is responsible for selling manufactured automobiles to consumers. The passenger car market is expected to grow at a CAGR of 9% until 2026, which is great considering the pandemic. India is one of the largest car-manufacturing hubs in all of Asia. Thus, car dealerships have become a highly profitable business option.
With globalization and digitization, car dealers can efficiently broaden their reach and grow their target market. There are several types of car dealerships available such as hatchbacks, sedans, SUVs, sports cars, etc. This further allows tapping into specific markets.
Car Detailing Business
As the number of cars on the road increases, the need for high-quality car detailing services has risen. Car detailing is the process of cleaning and restoring the exterior and interior of cars to their original look. Car detailing is a manual process that requires a high level of skill. Industry leaders such as 3M Car Care expect the detailing industry to grow by 30% in the coming years.
You can start a car detailing business at a relatively low cost. Since the only requirements are a large space, detailing equipment, and a skilled workforce, this business can yield high profits. There is also the option of buying an established car detailing franchise to get a head start in the industry.
Car Rental Business
The car rental business is a lucrative venture option in the automobile industry. Dominated by the unorganized sector, it has been growing at a CAGR of over 14%.
With differentiators such as OLA offering rental services, the need for large fleets of cars is more than ever. Even with a small fleet of five cars, drivers, mechanics, and strategically placed stores, you can generate impressive revenue.
Car rentals require extensive research into the local market and customer needs. Since rental services are of various types, you can expand specific car rental services as well. For example, starting a luxury car rental or EV car rental.
Car Scrapping Business
Car scrapping is a unique business idea. There are hardly any organized companies in this market. Most of the market is captured by local garages, scrap yards, and individual businesses. Therefore, to start a car scrapping business you will need to create a reliable network of old car distributors. Having a constant stock of old cars is important to generate revenue.
The scrap dealer physically inspects the car and quotes a price per kilogram of iron. This rate can fluctuate based on the market rate. On average, you can expect to earn around INR 15,000 per car scrapped. Thus, having a reliable network of distributors and scrap dealers can make this a profitable business.
Car Service Business
A car service business is another great business idea within the automotive industry. You can start a car service at a relatively low cost in India. All you need is a space to park four to five cars, a team of mechanics, and servicing equipment. Additionally, most car service businesses obtain brandings such as Castrol Mobil or Bosch to boost their business.
Bringing innovative business models can help your business stand out and increase profits. Models such as doorstep pick-up and drop, website service orders, and extended warranties, can help build long-term customers. Marketing is another core aspect of any business that can help it grow even faster.
Car Washing Business
The car washing industry is comparatively in its nascent stages. This means that there is a huge scope for expansion. Most of the car wash industry is dominated by unorganized businesses. Manual car washes and unskilled workforce are the primary types of services available. Starting an automated or semi-automated car wash in dense urban areas can prove to be extremely rewarding.
Car washes require a high investment initially but are quick to generate a high ROI. This is why location is the prime factor for a car wash. There are various types of car wash that you can start. For example, tunnel wash, flex-serve tunnel, in-bay automatic wash, etc.
The traditional taxi business is slowly becoming obsolete in India. Traditional taxi businesses are losing their grip in the market against taxi aggregators such as OLA and Uber. Therefore, you can start a private cab business that caters to the local market or a specific purpose. Competing with aggregators is difficult, thus, adopting a unique business model works better.
Starting with a fleet of rental cars and then transitioning into a taxi aggregator is the best way. Specific models such as inter-city cabs or monthly cab services have the potential to become popular. Another factor to consider is the digitization of your business. This will determine how easily customers can access your cab business.
Electric Car Charging Station
If you want to take advantage of the upcoming EV revolution, starting an EV charging station is the best way. Setting up a charging station requires an investment of up to INR 50 lakhs. However, the EV market in India is expected to be at a CAGR of 90%, which is higher than any other automotive segment.
India’s electric vehicle (EV) market is estimated to be a Rs. 50,000 crore (US$ 7.09 billion) opportunity by 2025, with two- and three-wheelers expected to drive higher electrification of the vehicles.https://www.ibef.org/industry/india-automobiles/infographic
EVs are the future of transport and by investing in this technology you can future-proof your business. Additionally, EV charging stations can also generate revenue through advertisements, parking fees, partnerships, and sub-letting to food joints. Another advantage of charging stations is that you do not need any license to establish them.
Used Car Business
When you compare the sales of new cars to used cars, surprisingly, the used car market ranks higher. In 2020, the sale of used cars overtook the sale of new cars in India by a large margin. The used car market is expected to touch nearly USD 50 billion by 2026. Therefore, starting a used car dealership is a wise approach. Capitalizing on this rising trend, you can expect to earn very high profits.
Reliable car distributors form a crucial building block of this business. Thus, having a long inventory of cars is important. Secondly, a skilled team of mechanics is necessary to keep your inventory in top shape. All of these factors help to attract customers and increase satisfaction. This is one of the only industries that has not been affected by the COVID-19 pandemic.
Automobile Startups in India
India’s automobile industry continues to attract many foreign investors. Thanks to the high CAGR, new startups continue to emerge. Additionally, government subsidies to the automobile and EV industry have significantly helped startups expand in the country. Some of the most prominent automobile startups in India are as follows:
- CarTrade Tech
- Cars 24
The automotive industry is one of the most happening industries in India. This industry contributes around 7% to the gross national GDP. All reports have hinted at exponential growth in the next decade. Therefore, if you start a car business now, within the coming years you can benefit from an extremely stable and booming automobile market.