EVs can drive Indian automotive industry to $1.6tr by 2047

• Stakeholders in the automotive sector are cognizant of their obligation to foster localisation.
• Move to reduce imports from 60% to 20% by 2025 likely to translate savings of Rs20,000 to Rs25,000 crore over five years.

The Indian automotive industry is undergoing a transformative phase that not only underscores its resounding growth but also highlights its pivotal role in the nation’s economic aspirations.

As reported in the fiscal year 2024 (FY24), the domestic automotive sector has crossed an impressive valuation of Rs20 trillion. Pawan Goenka, Chairman of IN-SPACe, delineates a robust future trajectory, suggesting that this industry has the potential to soar to a staggering $1.6 trillion (Rs134 trillion) by the year 2047.

The ambitious projection is significantly anchored in the burgeoning electric vehicle (EV) market, aligning with India′s broader goals of achieving a $32 trillion GDP by the same year.

The automotive sector is not merely a contributor to the economy; it is fast becoming one of the key engines driving growth within the Indian context.

Reducing import dependence

Goenka emphasises that the industry, currently responsible for around 6.8 per cent of the GDP, is poised for an even greater impact. Over the past two decades, the industry has exhibited a remarkable compound annual growth rate (CAGR) of 17 per cent, indicating not only resilience but also a capacity to adapt and innovate.

The strategic focus on electric vehicles is expected to play a pivotal role in this evolving narrative.

With a pronounced shift toward sustainable transportation solutions, leaders within the industry, such as Vinod Aggarwal, President of the Society of Indian Automobile Manufacturers (SIAM), assert the necessity for India to enhance its capabilities in high-tech components crucial for the production of EVs.

To this effect, the domestic automotive industry has identified 50 critical components for local production, aimed at reducing import dependence.

The initiative signifies a broader strategy to fortify the supply chain and build indigenous capabilities, especially in electrical and electronic components.

The impact of the automotive industry extends beyond mere economic figures; it also significantly contributes to employment generation, creating numerous direct and indirect job opportunities across various skill levels.

A proactive approach

The aspect is vital in the context of India’s burgeoning workforce, wherein job creation must keep pace with population growth and urbanization.

Moreover, the stakeholders in the automotive sector are cognizant of their obligation to foster localisation.

The targets set by SIAM and the Automotive Component Manufacturers Association (ACMA) to reduce import content from 60 per cent to 20 per cent by 2025 reflect a proactive approach to enhance domestic manufacturing capabilities and instill greater self-reliance within the economy.

The strategy is expected to result in a substantial reduction in imports, translating to savings of Rs20,000 to Rs25,000 crore over five years.

India’s automotive landscape is currently marked by its status as the third-largest passenger vehicle market globally, the largest market for two and three-wheelers, and the third-largest commercial vehicle market. Such rankings not only affirm the industry’s robust growth but also its competitiveness on a global scale.

The anticipated proliferation of electric vehicles in India is likely to make them increasingly affordable, as Union Minister for Road Transport and Highways, Nitin Gadkari, conveyed optimism regarding the cost parity between EVs and traditional petrol or diesel vehicles within the next two years.

The development could catalyse a more extensive transition towards sustainable mobility solutions, further bolstering the automotive sector’s contribution to the economy.