The WAIPA World Investment Conference (WIC), scheduled to be held in New Delhi from December 11-14, 2023, provides a unique platform for global and business leaders, economics, academia, and representatives of investment promotion agencies (IPAs) to come together and share their expertise and experiences on current social and economic trends. The forum also provides lucrative opportunities for market players in different domains to find new growth areas. In addition, the forum offers a platform to seek new investments for projects that could fuel overall economic growth.

India’s automotive industry attracted an FDI inflow of $35,408 Mn from April 2000 till September 2023, making it the top five FDI recipient sector. Contributing nearly 7% to India’s GDP, the automotive industry is a major growth driver of macroeconomic and technological development. The sector provides direct and indirect employment to over 37 Mn people.

India exported 4,761,487 units of automobiles in 2022-23, spanning passenger, commercial, three-wheelers, two-wheelers and quadricycles because of proactive government policies and advancement in indigenous vehicles.

Over the past decade, India has emerged as one of the preferred destinations for manufacturing high-quality automotive components and vehicles of all kinds, as well as assembling vehicles, owing to the easy availability of talent, robust supply chain, and government support. Although the auto component manufacturing sector is competitive, domestic companies need to continuously innovate and improve the quality of their products to match global standards.

The enhanced adoption of internal combustion engine-based vehicles, whether passenger or commercial, has led to rising greenhouse gas emissions. A significant shift from fossil fuel-based vehicles to electric or hybrid models is needed to address the rising challenges caused by vehicle emissions. Hence, the Government is promoting the adoption of EVs and hybrid models through various schemes and subsidies.

Favourable Policies Strengthen Growth of Automotive Industry

Realising the potential of the automotive industry to create employment and drive economic growth, the government has introduced many policies to boost the sector's growth. 

The government has introduced three policies to increase the production of electric and hybrid vehicles in the country. 

The Faster Adoption and Manufacturing of Electric Vehicles in India Phase II (FAME India Phase II) Scheme was introduced in 2019 with an outlay of INR 10,000 Cr for five years. The scheme provides subsidies to those who use electric vehicles for public transportation or commercial use, aiming to promote the adoption of hybrid/electric technology in transportation, thus reducing dependency on fossil fuels. As of now, the total number of vehicles sold under the FAME INDIA scheme stands at 1,118,682, with 30,744,598 liters of fuel saved and 62,060,142 Kg of carbon reduction. 

The government introduced a Production Linked Incentive (PLI) scheme for the Automobile and Auto Component industry with a budgetary outlay of INR 25,938 Cr. Under this scheme, the manufacturers of automobiles and auto components can avail of financial assistance in the form of incentives up to 18% of eligible sales of electric vehicles and their parts. The scheme is intended to amplify the domestic manufacturing of advanced automobile products, including electric vehicle and their components such as batteries. As per ACMA estimates, India’s export of auto components stood at ~$30 Bn with an industry turnover of $69 Bn+ in FY23.

Another PLI Scheme approved for increasing the domestic production of Advanced Chemistry Cell (ACC) with an outlay of INR 18,100 Cr incentivises the establishment of Giga scale ACC manufacturing facilities in the country to strengthen the ecosystem for electric mobility and battery Storage in the country.  

These schemes will help India build self-reliance in vehicle production, boost exports, and thus accelerate the growth of the automotive industry.

Conclusion

With a stellar record of attracting substantial FDI, the automotive industry has become a cornerstone of India's economic landscape, contributing significantly to GDP and providing millions of jobs.

The proactive government policies, such as the FAME India Phase II and Production Linked Incentive (PLI) schemes, underscore the commitment to fostering innovation and sustainability in the automotive sector. 

These measures promote self-reliance and position India as a global hub for electric and hybrid vehicle production, paving the way for a greener and more prosperous automotive future. The 27th World Investment Conference's role in facilitating dialogues and collaborations is crucial for realising these ambitions and ensuring a robust and sustainable growth trajectory for India's automotive industry.

Register now for the presentation on “Investments in Automotive & Machinery” at the 27th World Investment Conference here: https://waipa.org/wic-register/