Overview of the Automobile Industry in India

The automobile industry of India is one of the largest in the world. India had the fifth-largest automobile market in 2020 and now ranks second in automobile manufacturing capacity in 2022.The domestic market for two-wheelers and passenger vehicles is enormous.This is because these are the preferred means of commuting among the 1.4 billion Indians. Adding to this demand is the widespread acceptance of Indian brands in many neighbouring countries,providing an international market for vehicles manufactured in the country.

India has been the world leader in manufacturing long-lasting and affordable conventional two-wheelers.The trend is also seen in the electric vehicle segment. The international automobile market has been showing growth in Asian markets too. Many factors have aided in a boom in this industry. Factors like the availability of low-cost skilled labour, cheap steel production, and various research and development centreshelp make India the viable choice. Continuous product innovation, technological advancement and an increase in demand for luxury vehicles in the country have further boosted the growth of the automobile industry in India.

Factors favouring the growth of the Automobile Industry in India

Growing Demand for Automobiles: The increase in the per capita income and the higher ratio of youth in the population indicate strong demand for automobiles in India.

Opportunities in the Market: India is poised to be a leader in shared mobility by 2030, with a significant share of autonomous and electric vehicles. While the focus of the manufacturers is shifting to electric cars, the demand in the market is enormous. Many new brands have made their mark, capturing a decent market segment and showing that there is scope for new entrants in the automobile industry. According to estimates, the EV industry will likely generate five crore jobs by 2030.

Rising Investment: The automobile industry has been receiving decent investments from investors. From April 2000 to March 2022, the industry received cumulative equity FDI inflow of US$ 32.84 billion. The Government of India expects this sector to attract US$ 8-10 billion in local and foreign investments by 2023.

Policy Support: In September 2021, the government issued a notification regarding a Government approved Production Linked Incentive (PLI) scheme for automobile and auto components worth Rs. 25,938 crores (US$ 3.49 billion). The Automotive Mission Plan 2016-26 is a joint initiative by the Indian government and India's automotive industry to set the roadmap for the development of the sector.

Licences and Authorisation that are needed to set up an automobile manufacturing unit

Apart from the known agencies issuing licences and permits to manufacturing units, the automotive testing bodies comprising in-house testing facilities by component and Original Equipment Manufacturers (OEMs) play a significant role in setting up the automobile industry. Some private testing agencies and government-funded autonomous agencies are the Automotive Research Association of India (ARAI) and the International Centre for Automotive Technology (ICT). The safety and quality standards for conventional vehicles working on internal combustion engines also apply to electric cars and are similar yet differ in many aspects. The government's regulatory standard covers information management, privacy, occupant injury prevention, safety measures, industrial waste management, etc. An automobile manufacturing unit requires the following licences and permits -

Consent NOC

The concerned State Pollution Control Board (SPCB)/ Pollution Control Committee (PCC) issues a Consent certificate in two stages: Consent to establish (CTE) and Consent to operate (CTO). These certificates are needed for the automobile industry under the Water (P&CP) Act, 1974 and Air (P&CP) Act, 1981.

Documents needed for obtaining Consent NOC certificate

• Duly filled application form of the concerned SPCB
• Signed undertaking
• Site plan with the roadmap 
• Detailed report of the project with a total investment
• Details of air emission/ effluent discharge/ hazardous waste in the facility
• Land ownership document
• Industry registration documents
• Consent fee (as applicable)

• Balanced sheet certified by a CA
• Analysis report of the industrial effluent and emissions from the authorised laboratory
• Copy any environmental clearance (EC) or other permission required by the government.

• Any document specified in the application form

Additional Licences are required to manufacture Automobiles in India

Factory Licence

A factory, defined under the Factories Act, will require the owner to register their premises with the government authorities before commencing business. Factory license acts as approval from authorities for manufacturing activities.

CMVR (Central Motor Vehicles Rules) Certification

BIS and AIS authorities publish Central Motor Vehicle Rules (CMVR) standards. The guidelines for these certifications stipulates that motor vehicles and their systems and components must be approved before entering the Indian market. CMVR carries out or witnesses the tests required to approve various standards or inspection criteria. They shall know about vehicles, vehicular systems, parts and components, and software. CMVR follow a system-based approach to the extent possible for certification purposes. It is required mandatorily for the automobile industry.

AIS Certificate

Some guidelines need to be adhered to during the manufacturing of Electric Vehicles, such as AIS038, 039, 040, 041, 048, and 049. Hybrid Electric vehicles have to comply with AIS102 Part1 and Part2. Adhering to these regulations is a must for the automobile industry.

Fire NOC

Fire NOC is a safety certificate needed by any automobile industry. The applicant needs to apply for this NOC from the state fire department to obtain approval for the building plan. The applicant can obtain Fire NOC for a residential/commercial building from the respective state fire department.

Market Overview of the Automobile Industry in India

The automobile industry is a growing industry that shows promise and is necessary for the nation’s economic and technological advancement. After a slump in the auto industry during the pandemic, India quickly recovered in 2021, with a growth rate of 26.7% against the previous year. The sector registered record sales of over 30 lakhs vehicles in 2021, out of the total production of over 4 million in the same year. The two-wheeler segment dominates the Indian automobile market.

If we look into the segmentation of the market share of the automobile industry in India,two-wheelers, with 81% market, have the most significant share. The Passenger Vehicle Segment comes second at 13%, while commercial vehicles and three-wheelers have an equal market share of 3%. Currently, (electric vehicles) EVs make up a tiny fraction (2.2 per cent) of automobiles sold worldwide. However, EV sales have been increasing over the last decade, and projections suggest that the EV market will continue to grow. AV (Autonomous/Automated Vehicles) technology is set to enter Indian roads and will need a complete array of services industry forecasts on the use of AVs to vary significantly. Many predict that it could be decades until fully automated vehicles are commonplace. These forecasts depend on factors such as the level of autonomy of AV.

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