India's government yesterday (2 September) revealed the latest roadmap for the country's automotive industry, known as the Automotive Mission Plan for 2016–26, with ambitious growth development plans.
IHS Automotive perspective | |
Significance | The Indian government has unveiled the latest automotive roadmap, known as the Automotive Mission Plan 2016–26 (AMP 2026). |
Implications | The AMP 2026 represents the collective vision of the government and the country’s automotive industry association about where the various segments of the automotive industry and auto component industry need to be by 2026 in terms of size and contribution to the overall Indian economy. |
Outlook | This is the second phase of the AMP, which was first launched in 2006 that lasted until 2016. The plan primarily targets a fourfold growth in the country’s automotive industry by 2026 to be the third largest automotive market globally through a series of measures, including improving infrastructure, and introducing new vehicle emission norms and eco-friendly vehicles. Although the details available are preliminary, the plan lacks clarity in the form of policy direction and real-time benefits to be made available to Indian automakers, which will play a key role in boosting the country’s vehicle manufacturing presence. |
The Indian government and the Society of Indian Automobile Manufacturers (SIAM) have revealed the latest automotive roadmap, known as the Automotive Mission Plan for 2016–26 (AMP 2026), which is aimed at boosting the country's vehicle manufacturing operations, reports news publication the Economic Times. The AMP 2026 was unveiled on the sidelines of the 55th SIAM Annual Convention held in New Delhi yesterday (2 September).
The Indian government and SIAM are targeting the total value of vehicle-related production to reach as much as INR18.9 trillion (USD284.8 billion) by 2026, under the AMP 2026, from the current levels of INR4.64 trillion. The figure is the top end of projections based on average industry growth of 5.8% each year and average GDP growth of 7.5% each year during the 10-year period. It includes the contribution from sales of cars, trucks, tractors, motorcycles, scooters, and components in the local market, as well as exports. The AMP states, "The automotive industry can be termed as the mother of the manufacturing sector in an economy, as its fortunes directly impact the fortunes of several related manufacturing industries… The rapid growth of the Indian automotive industry will provide a strong fillip to the micro and small and medium industries of the country across multiple sectors."
Some of the targeted key highlights of the AMP 2026 for the Indian automotive industry by the financial year ending 2016 are:
- The generation of some 65 million new jobs in the country during the 10-year period;
- India to be among the top three automotive industries globally, with vehicle exports accounting for nearly 35-40% of local production;
- A 3.5- to fourfold increase in the Indian automotive industry by value, from the current USD74 billion to some USD260–300 billion;
- The Indian automotive industry to contribute over 12% to India's GDP;
- Passenger car sales are predicted to grow to some 9.4–13.4 million units from the current level of 3.2 million units; an increase in commercial vehicle sales from the current level of 0.7 million units to some 2–3.9 million units and tractors from 0.6 million units to some 1.5–1.7 million units;The Indian automotive component industry to grow from the current levels of INR120 billion to some INR593.5–732 billion; and
- The Indian government intends to make the country's automotive industry the engine of its "Make in India" campaign.
Although the government has not revealed many details regarding the AMP plan, it intends to achieve its ambitious growth plans for the industry through the following incentives:
- AMP envisages the implementation of an End of Life Policy for automotive vehicles and components during the 10-year period, in an effort to spark demand for new vehicles;The plan intends to employ Bharat Stage V vehicle standards starting in 2019 and Bharat Stage VI vehicle standards starting in 2023 for passenger vehicle models;
- The implementation of an inspection and certification regime that will address vehicular pollution levels in the country; and
- A reduction in import duties on raw materials and reactive intermediates, as well as the implementation of a Goods and Service Tax Bill.
Review of AMP 2006–16
According to the SIAM website, the AMP was first launched in 2006 for a 10-year period ending in 2016. The plan had a vision that India would emerge as a favourable production location for global automakers, for vehicles and automotive components, with output targeted to reach US45 billion by 2016, accounting for more than 10% of GDP and providing additional employment for 25 million people by the target year. The plan primarily focused on boosting competitiveness in the domestic vehicle manufacturing industry and the flow of technology, demand, brand building, and infrastructure, export and international business, environmental and safety standards, and human resource development. The total turnover of the Indian automotive industry was estimated to be around INR122–159 billion by 2016, representing an increase from INR34 billion in 2006. The AMP 2016 plan envisioned India as the seventh largest automotive market globally by the target year, as compared to the eleventh during 2006, and to be the fourth largest truck producer in the world. However, SIAM earlier predicted that the industry will miss the ambitious targets, owing to the weak market conditions in recent years.
Outlook and implications
The Indian automotive industry, being a key industry in the manufacturing sector, is an important constituent in the programme. It currently employs around 19 million people in direct and indirect functions, and accounts for some 7% of the country's GDP. According to IHS Automotive light-vehicle sales and production data, India remains the fifth largest automotive market globally, while it maintains the sixth position as a vehicle manufacturer. The AMP 2026 was long awaited by many original equipment manufacturers in the country as the policy was expected to offer policy direction and incentives to the industry (see India: 29 September 2014: India's 10-year Automotive Mission Plan to be finalised by mid-2015). India's growth story rests on internal consumption to a great extent while exports, amid a lack of favourable trade agreements with key economies, largely depend on the labour and material cost advantage. The country's domestic market suffers from high inflation and interest rates, but growing urbanisation and lack of public infrastructure have been fuelling domestic demand for vehicles, particularly in the passenger vehicle segment. Although the plans outlined by the government appear preliminary, the programme lacks clarity on potential real-time benefits to be made available to the Indian automakers through the programme, to attract the kind of mass appeal it is targeting. Furthermore, to become the world's third largest automaker, Indian automakers will have to compete with the technologically strong US and Japanese automakers, which pose stiff competition.
More detailed information about the AMP 2026 is expected to be revealed in the coming weeks and IHS Automotive will continue to offer coverage of the programme.