India will become the 3rd largest Automotive market by the end of 2021

The Automobile industry in India is one of the largest employers with an ecosystem of more than 50 manufacturers and supporting ancillaries across various categories of vehicles. Although the year 2019 was a challenging year for the Indian Automobile market, things are gradually transforming and expected to boost sales. PGA Labs, a leader in India’s Automotive space, shares the top 5 trends that are going to shape up the Indian Automobile sector in 2020.

1. Non-ICE technologies to remain in the spotlight

The non-ICE (EV / hybrid) market is buzzing with a lot of activity especially in the 2 wheelers and 3 wheelers segments with a host of new entrants eyeing the market. In 2020, we would witness the market moving forward in this direction and with an increased local production especially in the battery segment. The Government schemes and improved policy support like FAME-II and GST reduction are developing the process faster.

Further, the government has also removed any timelines for the conversion of vehicles and chosen to be technology agnostic to allay the fears of the industry and let the market guide the adoption of a non-ICE platform. This is especially important when there are a lot of concerns around EVs not being completely carbon neutral as battery charging would mostly be done through the power generated from the coal-based thermal power stations. Moving further we expect some more changes expected to be done to the FAME-II policy to further boost the local manufacturing of the non-ICE vehicles in India.

2. The expected surge in pre-buying of vehicles

India’s leapfrogging to BSVI directly from the BSIV stage is the next biggest trend in 2020. The Indian Automobile industry is expected to show a significant rise in sales of BSIV models with the sales deadline approaching in April 2020. This rise in sales is because of the recently launched BSVI models which are more expensive due to the improved emission control equipment installed in the vehicles.

3. Chinese players setting up more manufacturing units in India

Chinese players like Great Wall Motors are closely following suit with its counterpart SAIC motors which has tasted initial success though its Morris Garages brand’s manufacturing plant in India. Great Wall Motors has committed to an investment of nearly US$ 1.5B over the next 3-5 years and would be finalizing the locations of their plants in Gujarat, Tamil Nadu, and Andhra Pradesh in 2020. Along with that, SAIC is also considering investing another US$ 350M in setting up a second unit in the country. Since all the units were already shutting down, this acquisition kept the job market alive, increasing the employment potential in the region.

4. India to become the 3rd largest Automobile market

With only 18 out of 1,000 Indians owning a car, compared with nearly 800 in the United States and around 500 in the European Union, there is tremendous potential for market growth in India. With the sheer size of its population, India has already displaced Germany as the world’s fourth-largest market for vehicle sales by volume, in 2018. A trend that is expected to continue in 2020 as the market is expected to recover, which would enable India to be on track to take the number three position with the market size of 5M cars from Japan by late 2020 and early 2021.

5. Compact and mid-size SUVs to gain further strength

The compact and mid-sized SUVs segment is the only area that has shown a significant increase in sales amidst the slowdown in the Automotive industry in 2019, buoyed by the entry of new models by top players.

The competition in the segment is expected to increase in 2020, with a host of new models being lined up for launch.

Overall, 2020 would continue to be a year of transition and expansion for the Indian Automobile industry as it tries to continue to grapple with the effects of the NBFC crises, change in emission norms, EV adoption, and related technologies, changing consumer preferences and the growth of shared mobility companies.

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