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The proposed Goods and Services Tax  (GST) implementation is likely to augment the $39 billion domestic auto ancillary industry following the envisioned 18% drop in taxation under the new regime. According to industry experts, the upcoming GST regime is expected to boost the auto ancillary industry. At present, the auto ancillary industry’s tax rate is 28% to 30%. This is expected to come down to 18% after the implementation of GST.

Experts believe that the industry is reaping the benefits of a favourable ecosystem in the domestic market and is also benefiting from the increasing global reach of Indian auto suppliers. The tax benefit will be passed on to the original equipment manufacturers (OEMs),  which will eventually drive expansion in the auto demand.

As per a report of the Auto Component Manufacturers Association (ACMA), implementation of the GST would open new prospects for the auto ancillary companies that are expected to grow double this year. The report also stated that the GST is expected to impact vehicle pricing, sourcing strategies, distribution costs, and dealer profitability.

However, the Supreme Court’s ban on BS-III vehicles has taken a toll on the automobile industry. The two-wheeler industry has suffered a loss of around `600 crore due to this order. The wholesale figures of Tata Motors commercial vehicles were also affected by the Supreme Court judgement.

Market: past and present

Before independence, the Indian automobile sector was considered a market dominated by imported vehicles and assembling car manufacturing units. After independence, India initiated manufacturing in this particular sector and is one of the largest sectors at present.

Initially, the total production of passenger cars was confined to the three main manufacturers, namely, Hindustan Motors, Premiere Automobiles, and Standard Motors. Today, the Indian automobile industry includes two wheelers, three wheelers, trucks, cars, and buses. The country has become the fourth largest exporter of automobiles surging ahead of Japan, South Korea, and Thailand. According to a report by the IBEF, the industry accounts for 7.1% of the country’s Gross Domestic Product (GDP). The two wheelers segment with 81% market share is the leader of the automobile market owing to a growing middle class and a young population. Moreover, the growing interest of the companies in exploring the rural markets has further aided growth. The overall passenger vehicle (PV) segment has 13% market share. Last year, the overall automobile exports grew by 1.91%. Private vehicles, commercial vehicles, and two wheelers registered a growth of 5.24%, 16.97%, and 0.97%. In addition, several initiatives by the Indian government and the major automobile players are expected to make India a leader in the two wheeler and four wheeler market in the world by 2020.

Growth trajectory

As per data released by the Department of Industrial Policy and Promotion (DIPP), to match the growing demand, several auto makers have started investing heavily in various segments of the industry during the last few months. The industry has attracted Foreign Direct Investment (FDI) worth $15.79 billion between April 2000 and September 2016.

The Society of Indian Automotive Manufacturers (SIAM) also stated that the Indian automotive sector is presently a $74 billion industry and by 2026, the industry is expected to achieve a turnover of $300 billion, with a compound annual growth rate (CAGR) of 15%.

The Automotive Mission Plan (AMP) was drafted for 2016-26 with the support of the ‘Make in India’ campaign and aims to augment the auto industry. This is likely to contribute 13% to the GDP, whose present contribution is less than 10% and may generate an extra 100 million jobs and project $80 billion in capex investments.

Michael Jopp, Vice President Sales and Marketing,  Mercedes-Benz India, said, “2016 was a successful year for us. We opened 10 new outlets across India in the same year. Considering all challenges in the previous year and the demonetisation, we had 13,231 sales in 2016. January and February had a quite good start and we consider March to be a strong month. We are confident that we will come out stronger than previous year.”

Commenting on the sales performance, Mayank Pareek, President, Passenger Vehicles Business Unit, Tata Motors, said, “The sales for the month of March have been encouraging with a robust growth of 84% owing to the continued demand for TIAGO and HEXA. The launch of the HEXA, TIAGO AMT and TIGOR has set new benchmarks in their respective segments indicating Tata Motors to be one of the fastest growing manufacturers in India.” Last year, Tata Motors was the fastest growing manufacturer in West Bengal at 22% compared to the general industry growth.

Investments and initiatives

Some of the major investments by the private players are like those by the electric car maker Tesla Inc., which is likely to introduce its products in India sometime in the summer of 2017. South Korea’s Kia Motors Corp. is targeting its first factory in India either in Maharashtra or Andhra Pradesh and plans to make it operational from the end of 2018 or 2019. Several automobile manufacturers are exploring the possibilities of introducing driverless or self-driven cars for India. BMW plans to manufacture a local version of below-500 CC motorcycle for Indian markets. Suzuki Motor Corporation is likely to set up its second assembly plant in India. SAIC Motor plans to invest $1 billion in India by 2018. General Motors also plans to invest $1 billion in India by 2020. Vivek Srivatsa, Head - Marketing, Passenger Vehicle Business Unit, Tata Motors, said, “Tata Motors plans to add 200 sales touch points in FY 17-18. We wish to be the number three car manufacturer in the country by the end of 2019. Right now we are at the fourth position in the country as well as in West Bengal.”

The Government of India plans to introduce a new Green Urban Transport Scheme with a central assistance of about `25,000 crore to boost the growth of urban transport. The  Indian government also aims to make automobiles manufacturing the main driver of the ‘Make in India’ initiative as it expects passenger vehicle market to triple to 9.4 million units by 2026, as highlighted in the AMP 2016-26.
The government is also likely to provide tax benefits to  electronic cars.

Future

India’s automotive industry is highly competitive. Young Key Koo, Managing Director, Hyundai Motor India Ltd., has stated that the country is a key market for the company. The IBEF reported that the Indian automobile market is estimated to grow at around 10-15% to reach $16.5 billion by 2021 from around $7 billion in 2016. According to Guillaume Sicard, President, Nissan India Operations, the income tax rate cut from 10% to 5% for individual tax payers earning under `5 lakh will create a positive sentiment among the first time buyers for entry level and small cars.

Auto Review:

Top three recent launches in India:

Luxury business sedan, in India, for India!

The new Mercedes E-Class is synonymous with driving pleasure. What sets the BMW apart is its driving dynamics and indigenous design. The new E-Class is ‘Made in India’ and ‘Made for India’. The bonnet is elongated coupled with a coupé-esque. The powerfully extended vehicle body is characterised by short overhangs, a long wheelbase, large wheels and taut, well-defined flanks displaying a fresh,
stylish and dynamic interpretation of the feature line.

The long wheelbase version of the new E-Class will be India’s first new generation car to be locally produced since the market launch. The E 350d features a 2987cc V6 diesel engine. The E-Class also features an attractive air body control, chauffeur package, 37 degree recliner rear seats, 9G-TRONIC transmission, Burmester surround sound system, parking pilot, a wide-high resolution and bright display with a next generation 12.3 inch screen as standard and 64 colour ambient lighting. The price range is from `58.25 lakh to
`72.07 lakh.

The Honda with a difference

The Honda WR-V is an all new sporty lifestyle vehicle based on Honda’s global jazz platform. After a successful research, Honda has come up with a sporty and sophisticated exterior design, high quality spacious interiors, with advanced equipment, top of the class fuel efficiency and a full array of safety features.

Developed under the concept of ‘Refresh for Urban India’, the car is built around three core concepts of urban active lifestyle that is high seating stance and ground clearance, smart compact exterior with spacious interior along with versatility and utility, and a pleasurable interior and class leading fuel efficiency.

The new WR-V has a striking road presence with its bold looks. The car offers exclusive day-time running LED DRL and position lamps and the front grill with solid wing face. Based on Honda’s ‘Man Maximum Machine Minimum concept’, the WR-V offers luxurious space much more than higher cars in this segment.

The car length of 3999 mm, width of 1734 mm and height 1601 mm and it boasts a wheelbase of 255 mm and ensures 188mm of ground clearance and 363 ltr. of boost space. The price ranges between `8, 04,500 and `10,35,600.

Tata Motors brings a new era of Style with Tata TIGOR

Tata Motors launched its new ‘StyleBack’, Tata TIGOR, meant for the young and fast-paced generation. With its stunning design, the Tata TIGOR is set to build on Tata Motors’ existing passenger vehicle portfolio and address needs of the ever evolving customer. At a starting price of `4.99 Lakhs for the Revotron 1.2L (petrol) variant and `5.92 Lakhs, for the Revotorq 1.05L (diesel) the TIGOR will be available across the country.

Available in 8 variants (with 2 optional variants) XE 1.2 P, XT 1.2 P, XZ 1.2 P, XZ (O) 1.2 P, XE 1.05 D, XT 1.05 D, X Z 1.05 D and XZ (O) 1.05 D, the TIGOR will come in six exciting colour options - Copper Dazzle , Espresso Brown, Pearlescent White, Platinum Silver, Striker Blue and Berry Red. The company has worked closely with HARMANTM to design and engineer an acoustic audio and infotainment system for this model.