India is one of the top five car manufacturing countries in the world. This rapid growth is due to the liberalization that took place in the 90s. Since then several international brands have entered the Indian market. Today, India is the Asian hub for passenger cars along with Japan and China. Let’s take a deep dive into the automotive industry in India.
The Automotive Industry’s GDP Contribution
India has made large strides in automotive production. In the 90s, passenger-car production did not peak at 40,000. Compare that to the number of cars being produced in India now. In 2019, over 26 million vehicles were manufactured and sold. This immense growth has made the automotive industry an important contributor to India’s GDP. The auto sector contributes around 7% to the country’s total GDP. But if you look at the manufacturing GDP specifically, the automotive sector contributes an astounding 49%, as reported by Auto Insider.
Understanding key market statistics such as this is important when deciding to start any automotive business. Currently, India sits at the fifth position in the passenger-car market. However, if the projections are correct, the country will emerge as the third-largest passenger-car market in the following years. Due to the rapid R&D and in-house manufacturing units, cars will get more affordable leading to a sharp rise.
Understanding the Auto Industry Segments
The automotive industry is segmented into various categories – cars, two-wheelers, three-wheelers, industrial vehicles, EVs, and much more. For perspective, let’s take a look at how the car industry is segmented. The car industry is primarily segmented into eight categories – A, B, C, D, E, M, J, and Crossovers.
- A, B, C, D, E: These are the primary segments in the car industry – Mini Hatchbacks (A), Small Hatchbacks (B), Small Sedans (C), Sedans (D), Executive Luxury Cars (E).
- M and J: This segment consists of Multipurpose cars (M). These cars have more seats, are small, and mostly come at the bottom of the chain. The second type of category is Sports Utility Vehicles or SUVs (J). These are high-performance vehicles that can seat a family, go off-road, or buzz through traffic.
- Crossovers: This segment has lately seen a dip in sales. However, crossover cars can be considered a hybrid of hatchbacks and SUVs. They have a powerful engine in a small body. For example, the Honda W-RV is a crossover vehicle.
Growth of automobile industry in India
Considering India’s position in the global automotive industry and GDP representation, the industry has immense potential for growth. Despite a hit to sales due to COVID-19, the automotive industry has shown sure signs of growth. In 2020, around 4.77 million automobiles were exported, measuring a CAGR of 6.94% during 2016 – 2020. The export and the domestic market are largely dominated by two-wheeler sales.
Another interesting growth stat is in the sale of electric vehicles. As the government brings in reforms to make electric vehicles more accessible, the sales numbers continue to grow. In 2020 alone, the sale of electric vehicles saw an increase of around 20%. As the COVID-19 pandemic flattens out, the Indian automotive industry is expecting a strong recovery in the year 2021-2022. According to the Indian Brand Equity Foundation, the automotive industry is expected to reach a market valuation of over USD 280 billion by 2026.
The EV Market in India
While fuel prices touch a new high, the EV market simultaneously is expanding its customer base. The rise in EV sales has never been higher in the country. Due to several government subsidies, the EV market and infrastructure in the country are improving by leaps and bounds. According to a report, India’s electric vehicle market is expected to reach a market cap of USD 152.21 billion by 2030. But the most impactful figure is the growth rate this industry will follow in these coming 10 years.
The market is expected to expand at a CAGR of 94.4% from 2021 – to 2030.
While it is too early to predict whether EV businesses will exactly follow this trend, there are signs that point towards it. For example, the FAME scheme and the growing electric charging network around the country. Companies like OLA, TATA, and Hyundai are bringing rapid innovation to the EV market.
Top 5 Automotive Startups impacting Mobility in India
The automotive market is flooded with giants such as TATA, Bajaj, Hyundai, etc. However, there are several fully funded startups that have brought tremendous growth in the industry.
These startups have used e-commerce as a strong growth channel. Let’s take a look at some of the top automotive startups in India.
CarDekho is India’s leading automotive start-up that helps buyers select the right car for them. It was the first company to bring in the digital revolution in the auto industry. It successfully managed to digitize the automotive ecosystem. Founded in 2008, the company has secured a total funding of USD 497.5 million.
CarDekho has a website and an app where detailed information along with expert reviews of each car is posted. The company has partnered with over 4,000 car dealers and banks across the nation to make purchasing cars online as easy as possible. It even provides backend customer management services to car dealers.
Some of the noteworthy investors in the company include Ratan Tata, Axis Bank, HDFC Bank, and CapitalG.
2. CarTrade Tech
CarTrade Tech is a unique multi-channel automotive platform. It facilitates buying new cars, used cars, getting car loans, selling cars, buying two-wheelers, getting vehicle dealerships, vehicle OEMs, and much more. Founded in 2010, the auto classified platform has acquired total funding of USD 307.4 million.
Featuring an intuitive web interface, finding the right vehicle is mere clicks away through CarTrade. The company’s subsidiary, CarTradeExchange offers B2B services such as online auctions and sales. Apart from a strong online presence, the company also has a physical presence in over 80 cities in India.
Launched in 2013, Zoomcar brought a revolution in car rentals. They made renting out cars easier than ever. Powered by an app and a network of car points, customers could easily rent cars at incredibly low prices for the first time. Zoomcar has a presence in over 34 cities in India. The company has managed to secure total funding of USD 291.7 million.
Customers can also host their own cars for rent and earn on the platform. Therefore, the platform continues to push out innovative features. Recently, Zoomcar has partnered with Ford and Mahindra to provide EV rentals for the first time in India. Some of the noteworthy investors in the company include Mahindra, Ford, and Sequoia Capital.
4. Cars 24
Cars24 is the largest online platform to buy and sell used cars and bikes. Featuring expert reviews and quality-tested vehicles, the company has skyrocketed in recent years. Their standout feature is getting the lowest price for a vehicle within one hour.
Cars24 recently secured a massive USD 400 million investment and reached a whooping market valuation of USD 3.3 billion in just three months. The company has over 205 branches in over 182 cities across India. With highly trained employees, it ensures that only inspected cars are sold on its platform.
CarZippi is a unique automotive startup that brings high-quality car services to your doorstep. Founded in 2015 with a seed capital of INR 52 lakhs, the company offers complete car care – car wash, sanitization, and repair services across India. CarZippi was one of the first companies to bring innovation to car care services in India.
CarZippi caters to both B2C and B2B customers. With both web and mobile applications, it makes ordering service hassle-free.
Backed by partners such as Shell Corporation, Amazon, Snapdeal, and InstaInsure, it is one of the fastest-growing startups in India.
Government Initiatives for the Automobile industry
One of the reasons the automotive industry has grown at such a fast rate is government subsidies. The formation of several committees such as AISC, ARAI, and CTSC, have brought in favorable regulations in the automotive space.
In the past year, the Government of India (GoI) has introduced a PLI scheme worth USD 28 billion for five years to support the growing auto industry.
Additionally, the Faster Adaption of Manufacturing of Electric Vehicles (FAME) scheme for speeding up the adaption of electric vehicles is spearheading the EV market. The government has injected nearly USD 3.61 billion into the FAME scheme and the production of hydrogen-fuel vehicles (PEVHV).
Effect of GoI Initiatives on the Automotive Industry
Initiatives such as the ones mentioned above have kept the automotive industry afloat despite the economic hit from the COVID-19 pandemic. Further subsidies under the MSME scheme have helped new startups and businesses launch in the country.
Due to government intervention along with high FDIs, the automotive industry is set to make a drastic comeback in 2022 both in the domestic and international markets.
Industry reports and expert analysis point towards the growth of the Indian automotive industry. Despite the industry’s GDP contribution shrinking by half percent due to the pandemic, the Indian automotive industry still leads in GDP contribution in all of Asia. With the adoption of newer technologies, digitization, and the EV revolution, there lies enormous growth potential in the Indian automotive market.